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Complexity Can Kill Your Returns

trading complexity can kill your gains

It wasn’t the great, powerful Wizard of Oz that got Dorothy back to Kansas…

It was something much simpler: Three clicks of the heels of her ruby slippers.

Voilà.

Investing works the same way. It’s pretty simple.

To make money in the stock market, you just need to know what to buy. Companies that:

Once you buy them at attractive prices … then sit back and let the business drive the stock price higher.

But even though it sounds simple, many everyday investors still have a hard time…

Forget the Noise

Bloomberg recently reported that retail investors are underperforming professional funds by the biggest margin in several years.

Why?

Because they’re making something simple, complicated.

They get caught up in noise, hype and the fear of missing out. And in the end, they still miss out on gains.

The crazy thing is that a lot of the pros underperform their benchmarks.

And retail investors… Well, they could beat the pros in a simple way — by just buying an S&P 500 Index fund.

The Real Talk is that investing is simple and most investors make it complicated.

That’s why I keep investing as simple as possible in each issue of Alpha Investor

Like Drawing With Crayons

For example, I recommended Marvell Technology Inc (Nasdaq: MRVL) in February 2019. It makes semiconductor chips.

My thesis was simple…

The CEO was positioning the company to make more chips for 5G and artificial intelligence products. These massive tech trends would spark higher demand for Marvell’s quality products.

As a key leader in a tech revolution, more demand would lead to higher stock prices.

And boy, did it play out even better than I expected. We’re now up over 377% on our position.

Since its stock is currently trading way above my buy-up-to price, I wouldn’t recommend taking a new position or adding shares now. But Marvell’s future looks even brighter ahead.

The point is, keep investing simple.

Investing legend Peter Lynch puts it this way: “Never invest in any idea you can’t illustrate with a crayon.”

And Warren Buffett has even put together cartoon videos on businesses and investing that’s simple enough for kids to understand.

I’ve watched them and learned a lot. You can check out the Secret Millionaires Club cartoons right here.

If you do, let me know! Whether it’s to keep things simple for yourself or with your kids and grandkids to get them started, just send me an email.

Write in at RealTalk@BanyanHill.com and tell me which wisdoms you’ll be applying to your future.

Regards,

Charles Mizrahi

Founder, Alpha Investor

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