When investors develop and act on strong investment views—on subjects such as the outlook for oil prices, say, or gold prices, or interest rates—they generally lose money overall. That’s because strong views on subjects like these tend to distort your investment decisions.

Stock market advice: Relying on predictions can tempt you to take on too much risk

For instance, if you know (or think you know) that oil is sure to rise in the next six months or a year, say, then you are sure to invest more heavily in oil stocks than you would if you took a less extreme—that is, more balanced—view of the situation. You will also tend to invest in riskier oil stocks, rather than proven producers.

If you’re right about the price of oil, you will, of course, make money. But if you’re wrong, your riskier oil stocks will drop much faster than the price of oil itself.

Invest in your Financial Future for FREE Learn everything you need to know in '9 Secrets of Successful Wealth Management' for FREE from The Successful Investor. Secrets of Successful Wealth Management: 9 steps to the life you've always wanted, before and after retirement.  I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

Mind you, I’m not suggesting that you should ignore your own opinions, least of all your strongest opinions. My stock market advice is that you should put them in perspective. Rely on them in moderation. You need to view them in light of the reductio ad absurdum test that I wrote about in our August 23, 2011, TSI Network Daily Update (click here to read that article).

In that article, I wrote about reductio ad absurdum in relation to trading in foreign-exchange futures. If you really could get rich quick in 10 minutes a day of foreign-exchange trading, as promoters of foreign-exchange computer programs and courses would have you believe, why would anybody work?

The same advice applies to strong views or predictions about any market price. When it comes to predicting the market’s direction, no investor “gets it right every time,” as the saying goes. Any such investor would eventually acquire a sizeable portion of all the money in the world. Nobody ever succeeds in that.

Of course, many successful investors do hold a variety of strong opinions that are definitely worth listening to. However, these investors are successful because they recognize the fallibility of their opinions. They know some of their opinions are bound to turn out wrong.

This mostly leads them to take an investment approach that has something in common with our three-part TSI Network stock market advice. That is:

1. Invest mainly in well-established companies;
2. Spread your money out across most, if not all, of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities);
3. Downplay or avoid stocks in the broker/media limelight, where risk is high due to bloated investor expectations.

Your opinions on the market, commodity prices, interest rates, the economy and so on, are the weakest part of your investment decisions. To succeed as an investor, you need to keep that fact in mind when you make those decisions.

If you’d like me to personally apply my time-tested approach to your investments, you should consider becoming a client of my Successful Investor Wealth Management service. Click here to learn more.