Discipline is key to any successful investment strategy, and fortunately, there seems to be a lot of it these days.

Risk has fallen out of favor over the past 12 months, with investors pulling money out of high-yielding stocks and reallocating it to fixed-income products such as bonds and money market funds, according to recent Cutting edge research. Rather than a sign of panic, investors are sticking to portfolio targets and rebalancing after years of strong stock returns. Much of the repositioning is being handled by financial planners, along with automatic rebalancing programs built into model portfolios and robo-advisors. Surprisingly, though, Vanguard is also seeing the same behavior among do-it-yourself investors.

“Some (more experienced traders) have a cynical view that the naïve retail investor is not doing a good job,” said Fran Kinniry, head of Vanguard’s Center for Investment Advisory Research. “Investors are setting up a portfolio and rebalancing it. That’s not easy to do because you’re selling your winners and buying your losers.”

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It’s no secret that the stock market has been torn apart. In six of the past seven years, the stock has returned more than 17%, while companies like it Nvidia and Rocket Lab have given new meaning to the term growth stock. However, this performance has left many portfolios overweight equities and investors looking for other options:

• A combined $90 billion has flowed out of domestic and foreign high-growth stocks over the past year, according to Vanguard data.

• Meanwhile, nearly $600 billion poured into taxable money market funds, and another $106 billion moved into ultra-short bond strategies.

“For most of history, investors would chase yields,” Kinniry told Advisor Upside. “In the last five to seven years, we’ve seen investors behaving well, which is to say, they’re selling what’s hot and buying what’s not.”

Where is your Fed? With President Donald Trump nominating a new one President of the Federal Reserveall the political turmoil may create uncertainty around the bond market and rates, which the central bank held steady last week. However, Kinniry advises planners and investors not to panic, saying that the positive trends in fixed income from 2025 should continue this year. “The most important thing is to shut all that down,” he said. “The Fed only controls the very short end of the curve. The market will set interest rates for non-overnight yields.”

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