The Simpler Way to Invest Successfully

A few zealous investors would like nothing more than to spend most of their time poring over their stock holdings, looking for the best companies they can find. But the vast majority of folks would rather not obsess over their portfolios, preferring instead to find a simple way to invest and build wealth over time.

But given how volatile the financial markets have been recently, is there any realistic way to simplify your investments? After all, just when a particular investing method seems to grab hold and become successful, it often stops working -- throwing many investors for a loop.

The answer to simple investing
Luckily, there are steps you can take to make your investing life simpler. This month's issue of the Fool's Rule Your Retirement newsletter highlights an interview between Fool retirement expert Robert Brokamp and Bill Schultheis, an investment advisor and principal at Soundmark Wealth Management.

In the interview, the two experts look closely at the ongoing downturn and discuss how investors can best get through bad markets. Unfortunately, the impulse that many investors have right now is to make their lives more complicated, by looking for the perfect investment for this market.

For instance, with financial stocks like Wells Fargo (NYSE:WFC) and Bank of America struggling, many have gravitated to financial bear ETF ProShares UltraShort Financials (SKF). A host of similar sector-based stock investments, along with others based on commodities, have pushed investors into the mind-set that they need to identify hot sectors and make frequent moves to take advantage.

But you don't need such a complicated strategy. A much simpler one can still succeed.

Lessons learned
The problem with hot sector investing is that the hot sector inevitably goes out of style, pulling investors' portfolios down in the process. For instance, Schultheis focuses on value investing as a long-term strategy -- and it's a prime example of how investing cycles work.

During much of this decade, value stocks outperformed their growth counterparts. Among the largest companies, the difference in returns between growth and value stocks were pronounced. Here's a quick look:

Source: Yahoo! Finance. Style classification based on Russell indexes.

Yet as stocks in industries that traditionally included "value" stocks got more popular, they also got pricier -- while traditional "growth" stocks began showing some of the attractive valuations you normally wouldn't expect to see outside the value sector.

With the concept value turned on its head, it was only a matter of time before the relative performance of these stocks reversed course. Since the beginning of 2007, those growth stocks have done better than the value stocks -- far better in some cases:

Source: Yahoo! Finance. Style classification based on Russell indexes.

The point is not that value stocks are dead and gone forever. Investing strategies come in and out of favor, and trying to time which ones will do better than others not only complicates your life, but also often proves futile. You'd be better off building a portfolio that has the right mix of strategies for you, and then leaving it alone.

Learn more
That's just one takeaway from the Rule Your Retirement interview. Brokamp and Schultheis go into detail on a variety of different types of investments, including gold, bonds, REITs, commodities, and much more.

Want to read more? Tune into this month's issue of Rule Your Retirement, which has several insightful articles for subscribers to enjoy. Not a subscriber yet? It's easy to become one and start getting this useful information every month -- we'll even give you a free trial for 30 days to tour the service.

If you feel like your investing is too complicated, take heart -- a simpler portfolio doesn't mean you have to sacrifice good returns.

For more on smart retirement investing, read about:

• Is now the time to sell and walk away?
• The first step toward rebuilding your retirement.
• The top 5 financial lies of all time.