More money is made from buy low, sell high, then buy high, sell higher. Why? Because when you buy low, the effects of compounding from a lower base are much larger. Unfortunately, most investors do not buy low, sell high. Many don’t even buy high, sell higher. Instead, they tend to buy high, sell low.

This is not just some gut feeling. Study after study shows these truths to be persistent across not just retail money but institutional as well. Performance is chased, and process is only understood if recent returns are strong. What is rarely addressed is the question of why this phenomenon happens time and time again, and what one can do to prevent it from happening and infecting one’s portfolio decision-making process.

Put simply, the reason investors are unable to buy low, sell high is due to the burden of proof. The investment or strategy needs to present (prove) with positive current returns in order to break that money away from what is already working. That burden of proof is past performance even though past returns can look very different from future ones. In my normal course of reaching out to advisors whom I’ve met with or presented to in the past, I recently received a reply from an asset allocator who has been watching our various investment strategies. He noted that we have done well year-to-date and is watching our results, but that he “just needs them to prove themselves out more before committing capital.”

What is the burden of proof? It’s past performance. But if one waits for that proof to show itself, then by definition that investor isn’t buying low, selling high, but attempting to buy higher with strong past returns as the catalyst to do so. To buy low, sell high, the burden of proof isn’t strong recent returns, it’s poor longer term ones. Mean reversion is real, and that means the best investments are the ones you are naturally inclined not to be convinced of, i.e. the ones which haven’t had stellar returns to anchor your decision making on.

Gold Miners are a classic example of that this year, given how for years they massively underperformed and in 2016 have had a stunning run. The same goes for select commodities and pockets of the global landscape. Few truly attempted to buy low, sell high these investments because there simply was no past proof that future returns could exist, even though that is precisely why it does more often than not. I suspect given recent behavior in bonds, and Utilities, that anyone making an allocation to the old-theme of yield is vulnerable to buy high, sell low. Conviction in old leadership is how one suddenly finds themselves lagging over the long-term.

In today’s environment, the investments which have the least conviction are likely commodities, active equity strategies, emerging markets, and alternative investments. Want to buy low, sell high? Those are probably the areas to look at. Just know the best burden of proof for value often comes from an investment which has no proof at all and one you are least certain of.