We often reference Warren Buffett’s “too hard” pile in conversations with clients and prospects. When an investment opportunity is difficult to understand, evaluate, or explain, it goes straight into that pile. No debate. No second thoughts. He simply moves on.

It is a surprisingly powerful idea.

In an industry that often celebrates innovation and complexity, the discipline to say “this is too hard” can be one of the most valuable investment decisions an advisor makes.

We have come to believe that good investing often requires the same discipline.

Much like financial planning, investing has a tendency to become more complicated than it needs to be. Wealth management firms are, in many ways, professional storytellers. Strategies become more elaborate, structures more layered, and the narratives more compelling.

Yet the investment portfolios that serve families best are rarely the most sophisticated ones. More often, they are built on simple ideas executed consistently over long periods of time.

Over time we have noticed a pattern: as investment strategies become more complex, they often become more expensive and harder to evaluate. In our experience, as wealth management firms attempt to enhance returns or smooth volatility, they often turn to leverage, derivatives, or illiquid investments.

In many cases, these strategies belong in that “too hard” pile. Yet our industry has a tendency to present them as improvements to traditional investing. Sometimes they are. But more often they simply exchange familiar risks for risks that are harder to recognize.

Perhaps the most important point is this: volatility cannot be engineered away. Markets fluctuate and uncertainty is unavoidable. In reality, investors only have a small number of tools to make the journey more comfortable. Diversification can reduce the impact of individual investments, and a sufficiently long time horizon allows markets the opportunity to recover and grow. Complexity, on the other hand, rarely solves the underlying problem.

Simple portfolios also have another advantage: they are easier to understand, easier to evaluate, and easier to live with during difficult markets. When investors clearly understand what they own and why they own it, they are far more likely to stay disciplined when markets become uncomfortable. Complexity, by contrast, can introduce uncertainty at exactly the wrong time. When strategies are difficult to explain or evaluate, investors often struggle to know whether short-term volatility represents a temporary setback or a more fundamental problem.

Over time, that clarity matters. Investing is rarely about finding the most sophisticated strategy. More often, success comes from consistently applying a small number of sound principles over long periods of time.

For this reason, our team approaches new investment ideas with a healthy degree of skepticism.

In future posts, we will explore several investment strategies that have become increasingly popular within the industry and discuss why we approach them cautiously.

If you enjoy these perspectives and would like to explore a relationship with our team, we would welcome the opportunity to connect.