Rebalancing 100% index fund portfolio once a year

I currently have a 100% SPY portfolio that I contribute to a few times a year and plan to until I retire.

A friend of mine suggested I rebalance my portfolio once a year only on green years.

I would sell on the last day of the year, and buy everything back January 1st. He said the returns could be significantly greater than just buying and holding

I don't understand how this works if someone could explain it that would be amazing. Is this a plausible idea?

edit: I didn't fully understand his explanation, but he mentioned compound interest