The Traders Journal

Wall Street's Complexity versus Investors' Profits & Simplicity


“Any darn fool can make something complex; it takes a genius to make something simple.”  -- Pete Seeger

As a long-time trader, I am living breathing proof that simplicity and profits are positively correlated while complexity and profits are inversely correlated.  In other words, as my 25 year investing career has jettisoned multiple methodologies and numerous indicators, my profits have became more regular and predictable while my losing ratio has diminished.  This is the absolute antithesis of what Wall Street wants you to believe.  

Wall Street lives and breathes on complexity.  They pitch derivatives of every variety and alternative funds for specific self-serving reasons.  

1.    They want to convince investors that it’s far too complicated for them to manage their own money – therefore, the wisest decision is for investors to just give it to Wall Street managers instead.

2.    They try to assure you that with this complexity come “insider” rates of returns and big profits.  But then can you explain to me why so many university endowments and retirement funds are closing out their hedge fund positions?   Because the returns have not justified the risks, losses and complexity.

3.    Wall Street loves to use the cliché, “you get what you pay for” as justification for higher fees.  So then, can you explain to me again why so many academic studies have concluded that no load mutual funds outperform advisor-recommended loaded mutual funds?  The fact is that investors often do not get what they pay for.  

The catalyst for this week’s rant is that I cleaned out a closet with my old trading binders from over 20 years ago and was stunned by two observations.  The first thing I realized was that I had been so vulnerable to believing Wall Street’s siren song of complexity.  The second thing was that it was obvious my trading methodology back then was unnecessarily complicated.  

To most individual investors, it seems counterintuitive when I preach my doctrine of simplicity, but it is precisely this simplicity that empowers you to outperform the professional money managers.  Layer on top of that my other sermon that no one will manage your money with the same passion and commitment as you yourself and you have the magic ingredients for achieving consistent success as a stock market investor.

Wall Street is based on its own version of Yin & Yang as opposites and contrary forces are actually interconnected and interdependent.  In simplest terms, the market is made up of buyers and sellers, load and no load funds, passive and managed strategies.  The complexity and simplicity paradigm is just another example.  Much like life, one must decide to embrace the light or the dark, the hot or the cold, the high or low.  So too, as an investor, you must choose between the dichotomies that Wall Street offers you.

I am simply sharing the experiences of my own journey as an investor.  As I embraced the mantra of simplification in my investment methodology and my trading tools, my net worth grew.  My relatively small basket of 10 technical indicators and the Tensile Trading approach that I’ve written so much about are living testimonials to this mantra.

Trade well; trade with discipline!
-- Gatis Roze

Gatis Roze
About the author: , MBA, CMT, is a veteran full-time stock market investor who has traded his own account since 1989 unburdened by the distraction of clients. He holds an MBA from the Stanford Graduate School of Business, is a past president of the Technical Securities Analysts Association (TSAA), and is a Chartered Market Technician (CMT). After several successful entrepreneurial business ventures, Gatis retired in his early 40s to focus on investing in the financial markets. With consistent success as a stock market trader, he began teaching investments at the post-college level in 2000 and continues to do so today. Learn More
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