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Hedge funds failed en masse in 2008, when nearly 1,500 closed their doors. Many of these closures were due to the complexity of the funds themselves. When a bad market hit, they couldn't help but get caught in the downward spiral. And the bleeding continues; in the first quarter of 2009, investors pulled $103 billion from hedge funds. For the rest of 2009 billions more flowed out even though the market went up.

But what can we learn from their mistakes?
>> KISS Keep your portfolio and trading tactics simple.

In a world that has grown increasingly complex, I like things to be as simple as possible -- and that includes my investing.

For example, home mortgages were packaged and repackaged into mortgage-backed securities time and again until even the banks that invested in them weren't sure just what they contained.

The result? Government bailed out the "too big to fail" financial companies.

Complicated derivatives, concocted by academics, led to sky-high leverage around the world and eventually crashed many of the 1,471 hedge funds that closed last year.

Ponzi schemes proliferated behind account statements that looked just as unintelligible as legit investments. No one could really tell what was going on because of the complexity.

Too many investors equate complexity and secrecy with smart investing decisions. How else can you explain the rise of hedge funds over the past several years? They have very little regulation, usually use complex derivatives and futures contracts, and are generally tight-lipped about their investing decisions. To me, that doesn't sound like it is in the best interest of investors.

My investing style is just a little bit different. Like I said, I keep things simple.

In fact, you could sum it up in one sentence: Find an ETF or two that are moving with a trend and make medium size but consistently winning trades.

There are several reasons I like this "Keep it Simple" approach and think all investors should follow it.

1. It allows investors to be experts on their holdings.
   You've heard the phrase "Jack of all trades, master of none." To me that describes a lot of investors. Portfolios with dozens -- even hundreds -- of securities run an extreme risk of having more than you can handle. But keeping a very focused portfolio allows any investor the time to go in-depth into a handful of select markets.
   
   
2. It leads you to take profits and minimize losses.
   If you limit your portfolio just a few ETFs, while using stops and limits, you can keep it simple enough to manage in a few minutes each night.
   
   
3. You can't beat the market if you are the market.

A funny thing happens as you add more and more picks to your holdings -- your returns suffer. Experts will always tout the benefits of diversification. And I agree with them...but only if you want to track the market. I'm more interested in beating the market, especially considering the S&P was off -36% in 2008 and only gained about half of that back in 2009.

The more holdings you own, the closer you are going to come to matching the market's moves. That makes sense -- you can't beat the market if your portfolio is the market. If you want to beat the Street, you need to pick your very best investment ideas and use them to power your portfolio.

Each trading day I practice what I preach -- I pick only the ETF and trend that I think is poised to beat the market (the best news is that I don't actually "think," I only follow my proven system). And I don't stop there. I'm actually putting my cash to work in these picks with my real-money portfolio.

And it's simple.

It doesn't use Fibonacci retracements, MACD, or Bollinger Bands.
It doesn't use Elliot Wave analysis.
It doesn't use Gann analysis.
It doesn't require any expensive software.
It doesn't trade off of news.
It doesn't use pivot points.
It doesn't require previous market experience.
It doesn't require a subscription to any service.
It doesn't require you to stay glued to your computer all day.
It doesn't use patterns like the inside day, outside or narrow range day.

If you'd like to come along, I invite you to join my ETF Trend Trading membership when I re-open (which could be now depending on when you read this). You'll get the detailed guide to my methods, personal training, and a chance to follow my trades in real time.

Here's to the simple life,
Big A

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