In this world  professionals accumulate knowledge and to gain a higher income they present themselves as experts, because what they do can be complicated or complex. It is true, there are parts of every profession that are complex, but in all professions keeping the end goal simple is a key. If you can, you should always try to do the easy stuff and leave complex and complicated things for others. Tom Bradley of Steadyhand Investment Funds recently wrote about keeping it simple in the complex world of finance.

Diversification is a good thing because the only true knowledge of the market is after it has happened. No one really knows what asset class is going to perform the best. If you are diversified ideally you want to avoid the asset classes that go down. One method is to sell asset classes. the hard part is to know when to go back into the asset class as it rises in value. One example was oil stocks when down, then they bounced back to make great gains were you in or out? did you miss the gains?

If you listen to Warren Buffett which has been a good thing to do, he tries to buy good companies at reasonable prices. If you can buy a good company and catch a macro trend you will make lots of money. An example is for a number of years, China was the biggest buyer of natural resources and pushed prices up. Then things slowed in China, prices went down and now they have gone up again. When should you have bought? when did you buy?

Everyone who invests money has ideas of where the market is going, the general rule is when people who are at the margins, get really excited about the market it is time to sell. If everyone is selling, then it is a great time to be a buyer. There are many methods to gauge institutional investors (the insurance companies and pension funds receive monthly income which needs to be invested). In addition, firms try to measure investor sentiments and it works till it does not.

If you buy a stock and build a large position in it or the industry, knowing markets go up and down, you will want to hedge yourself against the downside. In general simple hedges or vanilla hedges are the best method, although the world of hedging can become very complicated quickly. It works till it does not.

Mr. Bradley says we all have our skills and preferences and you need to think about what you are good at. If you think you have an edge, continue, but if not keep your investments reasonably simple to understand and do besides to make money.

Linking to dividend paying stocks, given the low-interest rate environment these companies have been a simple solution. The idea is to buy companies which make a profit and can afford to pay dividends and ideally that increases over time. The stock price will move up and down, but generally profitable companies traded at high multiples than non profitable ones. Over time the stock price rises and you have received dividends along the way – nice a simple method to become wealthier.

There are more questions than answers, till the next time – to raising questions.