Keep It Simple Stupid (The KISS Principle to Investing)

The KISS Principle is something that I’ve grown up having engrained into my head. If you haven’t been hit over the head with it your entire life, KISS stands for Keep It Simple, Stupid. While this motto has served me well with life in general, it also is very applicable when it comes to investments.

Over the years, it seems that investment options have gotten more and more complex. We’ve gone from Stocks and Bonds to Mutual Funds and Fixed Annuities to Variable Annuities and Fixed Index Annuities to ETF’s to Smart ETF’s. If that isn’t enough, there are also Alternative Investments that are available.

Alternative (Alt) Investments are sometimes referred to as Structured Products or Non-Conventional Investments. These investments are typically riskier, but tempt investors with features or returns that differ from traditional investments.

Alt Investments are much more complex than the average investor is use to. (I could write an entire blog on each Alt Investment available, but it would likely make your head spin.) Unfortunately, some invest in these products without understanding the in’s and out’s of them. This can lead to confusion and, in some cases, poor outcomes for the investor.

Unless you understand the investment that you’re getting into enough that you can explain it to someone else, it might be best to remember the motto that I was taught growing up: KISS.

Being able to understand what you’re invested in is important for many reasons. If you don’t understand what you are invested in, you might find out that it’s not what you thought it was or, in the worst case, that it was a fraud. If you don’t understand the investment, ask that it be explained to you again (and again, and again and again), until you understand how it works.

Otherwise, heed this warning: KISS.