The temptation is always great to buy last year's winners. However, buying past winners is not always the best way to build wealth.

Take 2000. People who loaded up in 2000 on the winning stocks of 1998 and 1999 saw that strategy blow up when many of the technology stocks that soared in 1998 and 1999 came tumbling back to earth in 2000.

The best approach to building wealth over time is to eschew stocks that have already done well in favor of building a diversified portfolio of stocks offering reasonable valuations and good earnings and revenue momentum.

I know that doesn't sound sexy, but it will keep you out of trouble more often than not while allowing your money to grow at reasonable rates.

One final point about chasing winners is worth mentioning. Risk and return are joined at the hip. You cannot achieve outsized returns without assuming a higher level of risk. Now people who were earning 50% or 100% returns on stocks in 1998 and 1999 may not have realized they were assuming a higher level of risk to generate those returns, but they were. And that risk showed up in 2000 when some of the very same stocks that had risen 80% fell 80%.

The point I'm trying to make is that stocks that show huge gains one year are inherently risky stocks, which means what goes up big time may come down big time. That's one more reason not to chase winners.