Editor's note: To earn the biggest gains, you must embrace the market's uncertainty...

When making investment decisions, most people want to know what stocks will do next. But Stansberry Research senior partner Dr. David "Doc" Eifrig says in reality, it doesn't matter if you're bullish... bearish... or somewhere in between.

According to Doc, another factor is far more important than timing the market. And it can mean the difference between a major loss or a massive gain for your portfolio in the long term...

In today's Masters Series – originally from the October 5, 2021 Digest – Doc reveals two hard-to-swallow truths about investing today... explains what it means to be a stock market "realist"... and details a timeless piece of advice for any market environment...

The Truth Shall Make You Mad

By Dr. David Eifrig, senior partner, Stansberry Research

No one summed up the "truth" better than English writer Aldous Huxley...

Huxley, who lived from 1894 to 1963, wrote nearly 50 books in his distinguished career – both nonfiction and novels. He was nominated for the Nobel Prize in Literature nine times.

And somewhere along the way, he said...

You shall know the truth, and the truth shall make you mad.

That's a great summation of what's happening in the stock market right now. The "truth" I want to discuss in today's Masters Series can get you rather steamed fairly quickly...

We're clearly toying with the conditions for a market crash these days.

Even though markets have been down recently, valuations are still stretched near all-time highs... And that's true even though my colleague Steve Sjuggerud reasoned yesterday that it'll take more than that to kill the bull market.

Let's look at the numbers...

Say the stock market returns about 10% each year. That means it would usually return about 61% over five years (with compounding).

But since 2016, it has returned 112%. That's an incredible surge over a five-year period.

To get back on our long-term pace of around 10% annually, stocks would only need to return roughly 3% per year over the next five years. That would be a significant stretch of underperformance.

In other words, for the stock market to return to the performance we expect based on a century of economic history... it simply can't keep up its current pace.

That leads us directly into the second half of the "truth" about the stock market today...

The market is going to crash at some point. But you'll go mad trying to figure out exactly when.

Maybe this recent selling is the start of a bear market. Or maybe it's just a bump in the road during a healthy bull market. I don't know. And neither do you... nor does anyone else.

I get why that admission could upset some people, though... It sounds wishy-washy or like I'm withholding something valuable from you.

You may be searching for someone who can tell you exactly what to expect – and exactly when to expect it. So then, when you're faced with the truth that no one can consistently and accurately predict every single thing that will happen in the market... it's disappointing.

The problem is, most investors are fundamentally asking the wrong question. They want to know for certain what the market will do, so they can decide whether to get out or stay in.

During a presentation that we did together last year, my colleague Dan Ferris shared a quote from bestselling author Robert Greene...

The need for certainty is the greatest disease the mind faces.

That's just not how investing works, though.

You can't get certainty here... As I explained in last Sunday's Masters Series, the stock market is an uncertain beast. Rather, you must understand and embrace the fact that the market does unpredictable things all the time.

The sooner you can embrace the uncertainty, the sooner you can properly position yourself to prosper.

The truth is that I'm neither a bull, nor a bear. Rather, I'm a "realist." I'm the type of person who says, "Nobody panic. Let's all take a deep breath." In fact, this was the exact message I told my Retirement Trader subscribers on Friday.

Look, I've been through it all. I traded through Black Monday in 1987... the savings and loan crisis that followed into the mid-1990s... the Asian debt crisis in 1997... the dot-com bubble and bust in the early 2000s... the Great Recession in 2009... and of course, the COVID-19 crash in 2020.

Throughout them all, I learned an important lesson...

The only folks who make it out unscathed are those who keep a cool head.

Building wealth as an investor doesn't come from making rash decisions. That's true on both sides of the coin – the way up and the way down.

Yes, maintaining a portfolio takes good investment ideas... But it also requires a careful balance between conviction and position size – and another careful balance between risk and reward.

When the market is rising, it's easy to forget this discipline. It's easy to slide too much capital into the speculative and fastest-rising investments. It's easy to get too greedy.

The best analogy I can think of to show you what I mean is driving down the highway...

On a smooth road with no traffic, you feel comfortable driving faster and faster. The pedal sinks deeper and deeper... And the speedometer creeps higher and higher.

But then, just when you let your guard down, a pothole rocks your vehicle. That's when you realize you're moving far too fast.

You need that dose of reality to remember to stick to a reasonable speed limit. Otherwise, you could lose everything with just one bad move or one divot in the asphalt.

The same thing is true for all types of investors in the stock market...

For professionals, "sticking to the speed limit" often means limiting leverage. For individuals, it means managing your position sizes and your broader exposure to the market.

It doesn't mean predicting when the market will crash. That's the wrong question.

Instead, you must frame your mindset in a different (and better) way. Here's how I explained this idea to subscribers to my Income Intelligence newsletter in October 2018...

Many investors think of the stock market like a rocket that they ride higher and higher. A rocket, of course, goes up... until it doesn't. They think if only they could release right as the rocket peaks, they could float in orbit – the world of the wealthy – and watch the rocket plummet back to Earth.

That sounds fun, but it's the wrong way to approach things. The market doesn't have one trajectory – up and then down.

In order to time the market correctly, you need to get more than just your sell decision right... You also must decide when to get back in. (You may have to pay taxes on your realized gains as well.)

And more often than not, this will happen... The market will whipsaw back upward and force you to buy back in at a higher price, or you'll be forced to sit on the sidelines as you miss out on the bigger gains. More from that Income Intelligence issue...

It rarely works.

Fortunately, there's a better way to play the market's ups and downs. Don't try to time them with an "all or nothing" decision, simply tilt your allocations. It's that easy.

Don't ever decide that it's time to sell all your stocks... or to load every penny you have into them.

You have far more possibilities for how much risk you want to allocate between stocks, bonds, cash, and other investments.

It's a timeless piece of advice that every investor can use in any market environment...

Don't time. Tilt.

Keep your bets properly sized for the risk that they entail.

If you want to speculate in cryptos, go ahead. Non-fungible tokens could work, too. You could even bet that the Detroit Pistons will win this year's NBA title at 1,000-to-1 odds if you'd like. Any or all of these wagers could pay off.

But you must remember one valuable detail if you do that... Bet small!

Your position size needs to be commensurate with the risk and likelihood of the payoff.

The beauty of something speculative like growth stocks is that their entire appeal is in their upside. If they can return 100%, 200%, or more... even a small position will end up delivering a sizable return.

When the upside is big, the bet can be small.

On the flip side, proper position sizing is also critical for maximizing your returns. I'm sure some investors have been learning this lesson the hard way recently as growth stocks have gotten crushed.

Consider this lesson from trading coach Van K. Tharp. He runs a test whenever he speaks to a crowd...

He tells attendees to imagine they each have $100,000 to use for trades. The attendees can invest whatever amount they would like before each trade. He plays for 50 rounds.

Then, Tharp starts pulling marbles out of a bag. Each marble includes the results of a trade.

Now, everybody playing this game makes the exact same trades... But they all end up with different amounts of money. Their performances have ranged from bankrupt to $13 million.

The only difference is how big they all bet.

So it's important to bet small when a lot of risk is involved... That way, you won't lose a ton if the decision goes against you. But at the same time, you want to make sure that you're taking a large enough position to get the biggest reward possible from your capital.

It's a delicate balance of risk and reward.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: Position sizing can help you maximize returns and minimize losses in any market environment. But something even bigger is on most investors' minds right now... In short, with stocks falling so far in 2022, folks want to know what they should do.

That's why Doc joined fellow Stansberry Research senior partner Steve Sjuggerud and Director of Research Matt Weinschenk last week for an urgent investment briefing. They shared their thoughts on what could happen to stocks in the months ahead... and detailed the most important investment recommendation you'll hear from us all year.

If you missed it, you're in luck... A free replay is available for a limited time. You'll even learn the names and ticker symbols of Doc's, Steve's, and Matt's No. 1 stock picks for 2022. Watch the replay right here.