Ted Allrich is the founder of The Online Investor and author of Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he offers advice to investors who are just getting started.

I saw an article on the best performing stocks of 2007. Very helpful if you read it in January ... of last year. Doesn't do any good this year if you're looking to buy stocks. In fact, those stocks should probably be avoided just because they had strong gains.

Here's the deal: stocks that outperform in one year will most likely underperform the next. That's because whatever made them hot has been factored into the price, or the "hot" factor has cooled. For example, when a biotech stock announces it has approval from the FDA to sell a drug, the stock goes way up ... for a while. Then investors dig in and determine exactly what the market for the drug is, how much of the drug will sell at what price, the ability to management to deliver the drug, etc. There is a limit to how much the drug will make the company. When cooler heads prevail, and those numbers are crunched by many investors, the selling starts. Most "hot" stocks will outrun their true value because emotions take over. Greed grabs the wheel and drives. Conversely, stocks crash much lower than their true value when the news is bad because fear takes over, and common sense flies out the window.

It's a rare stock that keeps surprising investors on the upside, making earnings gains or new discoveries. There are exceptions, but the vast majority of companies focus on bringing one product to market, to monetize their research or manufacturing efforts as quickly as possible. If response is good for the product or service, then following up requires management, time and large resources. Developing and bringing out a second product is usually too much to handle.

An exception to this is the commodity universe. Whether it's gold or oil or corn, prices can continue to climb and create tremendous profits, for a while. When prices flatten or go down, profits will react accordingly. So a stock in the commodity arena may see more than one year's extraordinary profits. However, unless the price of the commodity keeps increasing, those profits will not grow.

Mutual funds act the same way. A fund that has a certain focus, such as value or aggressive growth or income, may be the darling of the year because its approach to investing is hot in the market. Remember how strong the results were from the dot-com funds in the late '90s? Investors couldn't throw money at them fast enough. Then 2000 hit with real impact, crashing those funds, some to extinction.

When investing, look ahead, not behind. What's happened will rarely tell you what will happen. Make some good assumptions about the future, such as the price of oil, interest rate direction, employment, etc. Then see what stocks will benefit from those assumptions. Some of your assumptions will be wrong. Some will be right. But if you diversify well enough, you will gain much more from this exercise than looking at the best stocks (or funds) of last year.