The (Surprisingly) Simple Path to Stock Profits

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Back in the fall of 2014, I stood on stage at a prestigious investment conference and asked the audience two questions:

“First, do you think financial markets are simple or complex?”

“Second, are the best investment strategies simple or complex?”

It’s a set of questions that has stuck with me for more than a decade.

Because it points to a critical misconception many investors never get over (one that can cost them a fortune in the long run).

Financial markets are complex.

They include, and are driven by, more factors than you or I could possibly count: corporate earnings (historical and expected), interest rates (absolute and relative), economic conditions (macro and micro), corporate leadership (which can’t be quantified), customer and investor “taste” (which is as fickle as anything) … and on and on … and on…

Oh, and investor psychology, of course — which is ever-changing and, quite often, downright irrational.

So let’s agree that financial markets are indeed complex, and then move on to the second question I posed…

Are the Best Investment Strategies Simple or Complex?

If you answered “complex,” then you’re in the majority.

Most investors believe complex investment strategies are superior to simple investment strategies.

At first blush, it’s a perfectly logical belief.

After all, we’re dealing in complex financial markets — on that, we’ve agreed. So why wouldn’t complex financial markets require complex strategies?

But as reasonable as this logic sounds … it’s dead wrong.

On the contrary, simple investment strategies are generally superior to overly complex strategies, despite what we force ourselves to believe.

It’s a fascinating quirk of our psychology…

Far beyond the investment world, human beings are hard-wired to prefer complexity.

We prefer complex explanations, with all their flavorful nuances, over simple ones.

We’re drawn to complex plot lines, with all their twists and turns, over simple, well-worn ones.

And our minds, with all their creative powers, are constantly creating intricate tales … when reality is too mundane for us to enjoy.

We like to be stimulated and entertained — and we love the novelty of something complex and “new.”

That’s perfectly fine for leisure activities. If you prefer reading J.K. Rowling (complex language and storylines) over Hemingway (simple language and storylines) … it’s “no harm, no foul.”

But when it comes to investing, simpler strategies consistently outperform.

Here’s why…

Rugged Outperformance Through Simple Application

It’s important to remember that you’re never investing “in a vacuum,” so to speak.

Complex markets are always evolving, always changing in unexpected ways that present new challenges and opportunities.

With a simpler system, you have a better grasp on exactly what’s going on inside your portfolio … and what you can do to optimize your performance in real time.

I once spoke with a reader who said he had 300 stocks in his portfolio. Imagine trying to keep up with 300 different positions and 300 different stop-losses, all in a topsy-turvy market like we have now.

His portfolio had become hopelessly complicated, leaving him feeling lost. And that’s the last place you want to be … especially when stocks are pulling back.

Because long-term outperformance is all about consistency.

And a simple strategy is not only easier to apply and manage over time … it’s also easier to understand — giving you critical peace of mind that can help you stay the course and maximize your long-term earnings.

(For more details on my simple, proven Green Zone Power Ratings system for beating the market 3-to-1, click HERE.)

To good profits,