Do you know the fable about the frog and the scorpion? It's a simple story about a scorpion that wants to get across the river. He asks the frog if he could ride on his back. The frog is reluctant, so he asks the scorpion how he can be assured he won't sting him. The scorpion tells the frog he has nothing to worry about. If he were to sting the frog, they would both drown. So the frog agrees to carry him across the river.

When the frog and the scorpion are about half-way across the river, the frog suddenly feels a sharp pain in his back. He looks back and sees the scorpion removing his stinger and starts to feel the numbness caused by the poison.

"Why did you do this Mr. Scorpion? Now we will both drown!", cries the frog.

"I know, but you see, I just could not help myself. It is my nature." says the scorpion.

This fable, made famous by actor Forest Whitaker's retelling in the movie "The Crying Game," has really important implications for investors.

How? Because our brain is like the scorpion. It often sabotages our most important objectives. We want to lose weight but our brain says, "Well, it's only just a small piece of cake." Or when we play golf, we say, "Don't hit it in the water." And then we hit it in the water.

As investors, we know it's important not to make emotional decisions, but it's so easy to get excited about a stock that has enormous potential, or to simply sit on cash yielding 0% because it feels better than taking a risk. The problem is that it's our nature.

This is why rule-based investing, or naked strategies, is much more effective than traditional methods. Statistical rule-based investing takes the emotion, judgment, and self-sabatoge instincts or tendencies out of investment selection.