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What Is KISS Principle in Investing?

UTC by John Caroline · 6 min read
What Is KISS Principle in Investing?
Photo: Depositphotos

The risks that come with investments call for proper directives so as to know the right steps to take and decisions to make when investing. The following guide about the KISS principle will help investors lead their investment-making processes.

The word “kiss” may attract different impressions usually when heard for the first time as it implies different meanings. The meaning of the word is dependent on what it is used to address. When talking about business, KISS is an acronym that in full means “Keep It Simple, Stupid”. KISS principle has provided a set of rules which have been commonly adopted over the years. KISS principle in investing has worked for many and has become highly practiced among other principles.

Although new investors might find it strange and awkward when they hear about references to the KISS principles of investing for the first time, it has become a common term for long-existing investors as the adoption of the principle has grown massively over the years. Hence it is more spoken about among experienced investors.

Over the years, KISS has become an ultimate principle that has seen many investors on the winning side. It has saved many from the verge of losing their funds, hence there have been more positive feedbacks to this principle than negative ones.

Meaning of KISS In Investing

As said earlier, KISS could mean different things to the outside world, but when it comes to the investment world, it is used to abbreviate a set of rules to guide investment decision-making. In other words, KISS in investing is an acronym that fully means “Keep It Simple, Stupid”.

The principle expresses an ideology that implies that most systems work effectively when they are made and kept simple, with no complications. Aside, being an investment strategy, the principle also works for the general world phenomenon.

It has been observed that most events or endeavors at all have always come out successful when processed as simply as possible. The results often turn out to be greater than the processes.

Quite interestingly, the phrase itself is simple in nature, and it lays an emphasis on the fact that investing may not necessarily be a complex process before profit can be maximized.

More so, it reminds investors not to ever put their funds or possessions in anything they do not have a vivid understanding of.

Origins of KISS Principle

As said earlier, the phrase was not formulated to directly address the investment space, it was deduced from a general world phenomenon and was later deployed into the investment sector after witnesses begin to testify of its impact on investment decisions and processes.

The phrase has been in existence for so many years as it was coined in the 1960s. Research revealed that it had originated in the U.S. after it was noted by the Navy to state simplicity as a key objective.

Main Rules of KISS

A good understanding of the phrase and what it implies already makes it obvious that the major principle of KISS is simplicity. Thus, investors should avoid complications when it comes to their investment processes. And they should have a clear understanding of what they are about to invest in.

However, there are some major concepts that KISS helps the majority of investors to understand. These concepts help investors to reduce risks and acquire profits at a slow and steady pace to win the game.

One of the notable principles deduced from KISS is the concept of diversification. Diversification in clearer terms means the practice of dividing the money a person invests between different types of investments. This concept explains the adage that advises one not to “put all eggs in a basket”.

This concept is the best way to reduce risks and secure funds while Investing.

How to Apply KISS When Investing

You can apply the KISS principle of investing in different ways especially when it comes to your personal investment plans. Hence, investors can choose to interpret the KISS principle with a touch of their own discretion and understanding of the principle.

However, whichever ways investors choose to interpret the KISS principle, they should bear in mind that the goal behind the principle is subject to being practical and realistic while safeguarding their funds.

Below are some of the guides to making investments with the idea of the KISS principle:

  • You do not need too much money to invest, you can invest with whatever you have.
  • Never borrow money to invest, make investments with your personal funds.
  • Avoid keeping frequent track of your investment. In other words, don’t check your investments every day, not necessarily every week either.
  • Never try to time the market.
  • Automate your investment plan. This implies that investors should set up a recurring deposit and leave it.
  • Do not invest on the verge of obvious risks. Some risks are obvious, you can detect them even before an investment is made at all.
  • Diversify your investment. Spread your stocks around and invest in different stocks or financial schemes as this reduces risk.
  • Keep plans you can best stick with. This implies consistency.
  • Never put your savings or retirement plan at stake by experimenting with stock picking.
  • Understand that you can’t do it if you don’t try, hence there is no better way to learn than by doing. As such, don’t be afraid of losing some funds, it’s normal and it doesn’t jeopardize success.
  • Learn about the investment package. Never invest in what you know nothing about. Little understanding is not advisable either, get a vivid understanding of the investment type before putting your funds.
  • Know and identify what the horrible investments are and avoid them as much as possible.
  • Understand that more liquidity results in lower returns.

The Bottom Line

The KISS principle has helped a lot of investors make the best investment decisions that have aided a successful investment experience for them. People who intend to thread the KISS path of investment should understand that making money in investing is not rocket science. Hence investors should not expect passive income at a speedy pace if they want to succeed with their investments.

Investors who adopt the KISS principle should understand that it is very important to stay disciplined and patient. This way, they can easily accumulate wealth at a fair and steady pace without putting their funds at the stake of losses.

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FAQ

What does KISS stand for in investing?

KISS in investing is an acronym that fully means “Keep It Simple, Stupid.”

How did the KISS rule appear?

The phrase has been in existence for so many years as it was coined in the 1960s. Research revealed that it had originated in the U.S. after it was noted by the Navy to state simplicity as a key objective. 

What are the main rules of KISS in investing?

It is obvious that the major principle of KISS is basically simplicity. The principles also extend to diversification and some others.

Thus, KISS suggests that investors should avoid complications when it comes to their investment processes. More so, they should ensure they have a clear understanding of what they are about to invest in.

How to apply KISS when investing?

Below are some of the guides to making investments with the idea of the KISS principle:

  • You do not need too much money to invest, you can invest with whatever you have.
  • Never borrow money to invest, make investments with your personal funds.
  • Avoid keeping frequent track of your investment. In other words, don’t check your investments every day, not necessarily every week either.
  • Never try to time the market.
  • Automate your investment plan. This implies that investors should set up a recurring deposit and leave it.
  • Do not invest on the verge of obvious risks. Some risks are obvious, you can detect them even before an investment is made at all.
  • Diversify your investment. Spread your stocks around and invest in different stocks or financial schemes as this reduces risk.
  • Keep plans you can best stick with. This implies consistency.
  • Never put your savings or retirement plan at stake by experimenting with stock picking.
  • Understand that you can’t do it if you don’t try, hence there is no better way to learn than by doing. As such, don’t be afraid of losing some funds, it’s normal and it doesn’t jeopardize success.
  • Learn about the investment package. Never invest in what you know nothing about. Little understanding is not advisable either, get a vivid understanding of the investment type before putting your funds.
  • Know and identify what the horrible investments are and avoid them as much as possible.
  • Understand that more liquidity results in lower returns.
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