Here's something interesting: From 1988 to 2000, S&P 500 earnings grew an average 6.6% per year. The index itself increased more than fivefold during this 12-year period, from 277 to 1500.

From 1998 to today, also 12 years, S&P 500 earnings grew an average of 5.7% per year -- not drastically different than the preceding period. Yet what did the index do? It declined slightly.

Two periods. Similar earnings stories. Very, very different outcomes. What gives?

The answer isn't complicated, but is probably the single most important investment lesson you'll ever need to know: In the first period, valuations started low and ended high. In the second period, valuations started high and ended low. That's it.  

Why is this simple point so important? Because starting valuation is the most influential variable in determining investment results. It's more important than earnings growth. More important than GDP growth. More important than interest rates. Buy at high valuations, and you'll do poorly regardless; buy at low valuations, and you'll do well regardless.

A great example of this is the recent history of Altria Group (NYSE: MO) vs. Wal-Mart (NYSE: WMT). Over the past 10 years, Wal-Mart earnings more than tripled -- an incredible feat. Yet even adjusted for dividends, its shares returned a mere 32% -- just a couple percentage points per year. In contrast, Altria's earnings (adjusted for spin-offs) have barely moved over the past 10 years as smoking rates declined. It's stock, however, has returned an astounding 480%.

Only one variable separated these two outcomes: Wal-Mart started last decade with a really high valuation multiple, Altria a really low one. That's it. This same phenomenon is what has caused companies like Microsoft (NYSE: MSFT), Intel (Nasdaq: INTC), and, heck, the stock market in general, to post lousy returns during a period of otherwise decent business performance.

It's common to think investing is maddeningly complex. Sometimes, though, it's almost embarrassingly simple: Buy stocks at low valuations and hold them; sell stocks with expensive ones and don't look back. Rinse, repeat.

Fool contributor Morgan Housel owns shares of Altria and Microsoft. Intel, Microsoft, and Wal-Mart Stores are Motley Fool Inside Value choices. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Altria Group, Intel, Microsoft, and Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.