The Benefits of a Simple Investing Strategy

There are hundreds of investing strategies out there. It can be easy to believe that the most complex ones might yield the best results, but that isn't often the case. Many average investors may start off simple, get increasingly complex as revisions and tweaks to the strategy are made, and when that doesn't yield results or it becomes far too time consuming to monitor, they'll land back at square one: keeping it simple.

Aside from saving you time lost on examining charts and statistics and ratios, there are other benefits to having a simple strategy:

• In the end, the price is all that truly matters. Price movements are where profits are created. A complex strategy isn’t necessarily going to augment this.
• The risk of loss is always present, even with the most complex of strategies. A complex strategy also does not equal success or earnings. A simple strategy may help you better control your losses.
• It’s common for traders to become overloaded as a strategy gets more and more complex. When it becomes too overwhelming, they’ll often find themselves stripping away the fancy strategies and going back to where they should have stayed in the first place.
• A simple strategy will be something you can stick to. Studies have shown that the more complex a strategy is, the less likely most traders are going to stick with it for the long haul.

I use the 200-day moving average as a guide for where to invest. When an ETF is above the line, it's a buy signal. If an ETF falls below its 200-day moving average, or if it drops 8% off its high without going below its 200-day average, sell it. It’s a rigorous discipline and is applied to all asset classes, sectors and global regions where there is ETF representation. It’s clear-cut, and you know exactly what your risk is.

It's important to keep in mind, though, that a strategy should be used. The most sophisticated or simple strategy doesn't do any good if it's not being put to work.