Why You Should Keep It Simple

In 1960, the U.S. Navy came up with the acronym KISS: “Keep it simple, stupid.”

The principle behind it was that most systems work best if they are simple rather than complex. While the mantra was originally applied to building airplanes, it just as easily applies to many other aspects of life, including investing.

Too many investors get tangled up in things like the price-to-earnings ratio, book value or some other financial metric. Sometimes the best approach is to keep it simple. Sure, these metrics are important, but with so many investment choices out there, it’s tough to sift through them all to find the best ones… unless you have a computer — and a system — at your fingertips.

This is one of the major benefits of systematic investing. A system can quickly sort through enormous amounts of data in no time at all to pinpoint what your best investment options are.


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This is also why the rise in computer-based investing has become so popular. Hedge funds have sunk billions into developing sophisticated systems in order to find an edge in the marketplace; even brokerage firms are turning to “robo-advisors” to help optimize clients’ portfolios.

But what I’ve noticed is that even in systematic-based investing it’s best to keep the system simple. That’s why my proprietary Maximum Profit system was built on two simple investment strategies: momentum and value. Sure, the algorithms behind the system aren’t exactly simple, but the concept of “momentum” and “value” are.

From there we’ve built proprietary momentum and value indicators that have proven to be extremely successful in selecting winning stocks — and, perhaps even more important, getting us out of stocks before all of our gains are wiped away.

The system works by utilizing a variety of metrics to identify companies that are doing well fundamentally, but only when the shares of those companies are beating the market. And when the trend begins to reverse, the “sell” trigger hits, and I advise my subscribers get out and move on.

#-ad_banner-#Without the Maximum Profit system, it’s highly unlikely that I would have invested in companies like Equinix (Nasdaq: EQIX), a stock I closed out in August for a 31% gain in less than nine months. Or current holding Trinseo (NYSE: TSE), where I’m sitting on a gain of roughly 31% since I added it to my portfolio at the end of May.

I also would have probably passed right over my latest pick. But thanks to my system, I recently added an independent oil and natural gas exploration and production (E&P) company. It has a portfolio of high quality assets with interests in nearly 65 million net acres all across the globe.

The company is able to generate significant free cash flow (roughly $750 million to $1 billion annually) from its established domestic assets that will help fund the exploration and production of other properties in its portfolio. This is significant for E&P companies since it’s so capital-intensive to dig for oil and natural gas, and many companies pile on enormous amounts of debt in order to fund those endeavors.

But it’s not just cash flows I’m looking at. The company’s share price momentum is strong — shares recently hit a 52-week high, indicating it’s still strong and has room to run.

And there’s more good news. OPEC (the oil cartel that essentially sets prices and production) earlier this week agreed to its first production cut in eight years. This is great news for oil drillers, needless to say, and the deal sent the price of West Texas Intermediate (WTI) crude up 9.3% on Nov. 30, its biggest one-day gain since February.

This deal should push the price of oil up, which will help pad the margins of my pick and keep the tailwinds of the stock behind it. However, I can’t reveal the name of this company here. This pick, along with my other Maximum Profit recommendations, is only available to my premium subscribers.

Regardless, keep in mind as you invest how valuable it is to keep things simple. And if you’re interested at all in having a simple yet incredibly successful system working for you, go here to learn more about the Maximum Profit system.