First things first: Don't confuse simple with easy! Investing is a difficult thing to do well and consistently...but that's different than complex.

When we say simple, we mean that more complexity, more confusing jargon, more legal paperwork, etc, does not make you more money! Having a simple model can save you in many ways.

From a 1969 L.R. Goldberg study comparing the psychosis diagnoses between a simple model, complex model, or human experts:

A study of 136 published studies that analyze the accuracy of “actuarial” (i.e., computers/models) vs. “clinical” (i.e., human experts) judgment found:

"Models beat experts 46% of the time; models equal or beat experts 94% of the time; and experts beat models a mere 6% of the time"

... from Wharton researcher J. Scott Armstrong:

"Complexity increases forecast error by 27 percent on average in the 25 papers with quantitative comparisons. The finding is consistent with prior research to identify valid forecasting methods: all 22 previously identified evidence-based forecasting procedures are simple."

Science supports this over and over... simple models beat complex.

Money is intertwined with emotions and humans are emotional animals!  It's impossible to "turn off" your emotional responses to money. If you've ever spent time in a casino, you know what I mean. Try to pretend you don't care about winning or losing on the craps table!

Not to mention, we all come with our own set of natural biases. Again, these can't be helped, it's just part of our makeup. The same person can be presented with the same set of facts or data, but make drastically different decisions, because they are armed with a different set of biases.

A relevant example of emotions and their effect on investing is called the "prospect theory." It basically summarized two findings:

• Faced with a risky choice leading to gains, individuals are risk-averse - ie - humans will make a small gain and 'take their chips off the table' to avoid losing it.
• Faced with a risky choice leading to losses, individuals are risk-seeking - ie - humans will hold onto a losing position (seek more risk) instead of selling.

Kahneman and Tversky found that "losses loomed larger than gains" ... the concept we now call "loss aversion."

Russell A. Poldrack, a professor of psychology at Stanford University, wrote about his 2007 study of loss aversion:

"In the study, we monitored brain activity while participants decided whether to take a gamble with actual money. We found enhanced activity in the participants' reward circuitry as the amount of the reward increased and decreasing activity in the same circuitry as the potential losses accrued. Perhaps most interesting, the reactions in our subjects' brains were stronger in response to possible losses than to gains—a phenomenon we dubbed neural loss aversion. We also found that individuals displayed varying degrees of sensitivity to loss aversion, and these wide-ranging neural responses predicted differences in their behavior. For instance, people with stronger neural sensitivity to both losses and gains were more risk-averse."

Summarizing this: your brain is hard-wired to be emotional with money decisions. Investing based on rules reduces your need to make "gut" decisions. You no longer care what that guy is screaming about on the financial news. You know when you buy, when to sell, and what causes each.

Much of investment success is just avoiding big mistakes. Get rich quick schemes (multi-level marketing), fad investment products (structured products), oversold life insurance, private or proprietary investment deals (your buddy's restaurant idea) - they're everywhere. And they are portfolio destroyers.

Along with not making bad investments, avoiding high fee products and unnecessary taxes can save you money every day, every year...and that money compounds too.