Editor's note: Warren Buffett built a reputation as a legend in the investing world... and for good reason.

But even Buffett's portfolio isn't foolproof... Just look at his massive loss in tech giant IBM (IBM), for instance.

In today's Masters Series, TradeStops founder Dr. Richard Smith shares several steps you can take to beat the market... separate yourself from the investing crowd... and take control of your portfolio today...

Eight Simple Steps to 'Foolproof' Your Portfolio

By Dr. Richard Smith, founder, TradeStops

Is there such a thing as a foolproof investing system?

After nearly 20 years of research and firsthand experience, I believe that I finally have an answer...

There's a saying at the poker table: "If you don't know who the sucker is, then it's probably you."

It didn't take me long in my investing career to figure out that I was the sucker. What I found amazing is how long it took me to figure out how to not be the sucker.

I had been at least moderately successful at most things I had tried in life... except investing (and selling encyclopedias one summer). I was accustomed to winning at most things. So why was I always losing at investing?

Eventually, I figured it out: Investing is a rigged game.

There are the obvious riggings – like financial advisers charging excessive fees, brokers churning accounts to generate commissions, Bernie Madoff-style Ponzi schemes, rampant insider trading, and high-frequency spoofed trades.

But one "rig" rules them all... financial markets are rigged against human nature. As value-investing legend Benjamin Graham famously said, "The investor's chief problem – and even his worst enemy – is likely to be himself."

Like me, Graham was speaking from firsthand experience.

There are, of course, legitimate market functions such as capital formation and allocation. But they make up maybe 10% of market activity – and that's being generous. The other 90% is smoke and mirrors intended to distract the suckers while their pockets are picked in every way imaginable.

Many of you are already well aware of the major behavioral biases of investing – things like regret avoidance (not selling losers to avoid regret), recency bias (overweighting recent information), and overconfidence.

But a quick search on Wikipedia returned an incredible 170 known and documented cognitive biases. At least half of them are relevant to investing.

Is it any wonder investing is difficult?

All of this is to say that investing ain't easy – and there are deep reasons why this is so.

The good news is, all of this can be overcome... for a cost. We have to acknowledge the fundamental uncertainty of investing – and embrace it.

That's the basis of the "foolproof investing system" that I've been working on for the past 15 years. It is foolproof in the sense that it's "proofed against fools."

As Robert Cialdini says in his book Influence: The Psychology of Persuasion, "I can admit it freely now. All my life I've been a patsy."

Just as Cialdini researched the psychology of compliance in order to better understand it and to defend himself against mass-media "compliance practitioners," I've put together my investing system to protect myself and others from the market riggings.

So without further ado, here are my steps to foolproof investing...

1. Find a source of good investment ideas (like those you'll find at Stansberry Research).
2. Look for investments that are in uptrends.
3. Invest in 10 to 15 different stocks and funds.
4. Risk 1%-2% of your capital on each position.
5. Position size for equal risk using TradeStops' volatility quotient indicator.
6. Don't put all your eggs in one basket.
7. Keep your average volatility quotient below 20%.
8. Exit when you hit your stop losses, and look for a new investment idea or wait for a re-entry trigger.

The great thing about this plan is that anyone can do it... It lets you separate yourself from the investing herd and beat the markets... And it puts you in the driver's seat and makes investing the prosperous adventure it was meant to be.

Regards,

Richard Smith

Editor's note: Richard's TradeStops software has made finding your next winning stock as easy as clicking a mouse. And this Tuesday, July 31, at 8 p.m. Eastern time, he's hosting a free live event, where he'll walk viewers step by step through his latest breakthrough. Plus, as a bonus for tuning in, he'll even share which stocks are poised to break out. Reserve your seat for this free live event right here.