My wife and I used to receive compliments for being perfect parents... then our third child came along and no one ever mentioned that again. It wasn't that she was bad, it was just that she had a different way of learning. Her oldest sister learned by logic. Sister number two learned by observing. And she, like the guy who had to pee on the electric fence to get it, learned by doing. To her logical, observant father, it was a flaw that drove me crazy. So, when she did something particularly stupid, she would have to endure one of my angry rants, after which she would usually acknowledge, "That wasn't very smart, was it?" At that point I would smile and reply, "Ya think!" She was basically a great kid, but damn, she was really a hard one to raise.

Then again, the Association for Psychological Science informs us that parenting any child isn't easy. A recent post, The Myth of Joyful Parenthood, states that "Raising children is hard and any parent who says differently is lying." And that isn't an unsubstantiated opinion, explains John Cloud in a Time Magazine article -- Kid Crazy. "Researchers have known for some time that parents are... more depressed than nonparents..." They're more depressed and stressed, writes author Jay Belsky, PhD, because of "...a fundamental truism about the world we inhabit: The future is uncertain. As a result, no parent...can know for certain what would be best for his or her...child..." Neither can investors know with certainty what is best for their portfolios. So, like parents, "investors hate uncertainty," points out Wall Street Journal columnist Jason Zweig. But certainty, which he defines as "...a state of clarity and predictability... doesn't exist, never has, and never will." However, "Our need for certainty in an endeavor as uncertain as raising children [or, I may add, investing for retirement] makes explicit 'how-to-parent' [or investment] strategies both seductive and dangerous," warns researcher and TED Talk sensation, Dr. Brené Brown.

Therefore, it is hard to resist "...seductive-sounding ideas that will supposedly enable you to beat the market," writes Zweig or be a "perfect" parent, Brown would add. But you must. That's why Brown says you have to "let it go" and Zweig says to "get over it." By doing that, Zweig explains you can then "...try to control the things that are controllable," which is mainly your behavior. So, Brown encourages parents to "Be what you want your kids to be" and Zweig admonishes investors to adhere "...to a set discipline... [to] prevent yourself from making impulsive decisions..."

Investors should heed both pieces of advice and try to emulate the behavior of disciplined role models like Warren Buffett. That means not only knowing what he does but also doing it. "Only when you combine sound intellect with emotional discipline do you get rational behavior," Buffett maintains. For him to nurture such intellect and discipline, he told CNBC, "I do more reading and thinking, and make less impulsive decisions than most people in business." It's something "All of you can do," he points out, "but I guarantee not many of you will do it." And that's the reason why so many investors make the same mistakes over and over.

As humorist Franklin P. Jones observed, "Experience enables you to recognize a mistake when you make it again." Regrettably, there is more truth than humor in that statement. It's true because, "...it turns out that our brains are hardwired to get us into investing trouble," laments Zweig. In other words, nature has cross-wired our brains in such a way that we believe that the world is more predictable and controllable than what logic, observable facts, or past experiences would suggest. Because of that, neither parents nor investors can let go of the belief that perfection (or near perfection) is possible. And that's not very smart, is it? Ya think!

"Stupid is as stupid does," is a memorable line from the Forrest Gump movie. The quote is a play on an old Southern expression, "beauty is as beauty does," which means true beauty is as dependent on how a person acts as it is on how they look. Likewise, being stupid has very little, if anything, to do with one's level of intelligence. People with genius level I.Q.s can still be stupid if they do stupid things.

If you don't believe that smart people can be stupid, then you obviously have never been in love. We all know that love is blind, but it is also "...deaf, dumb, and stupid..." writes the poet, Kahlil Gibran. And that is not only a poet's opinion, but also a scientific fact. The February, 2006 issue of National Geographic reported, "...scientists [have discovered] that the brain chemistry of infatuation is akin to mental illness."

What's interesting is the science of neuroeconomics has found that the brain chemistry of investors is similar to that of people who are passionately in love. That's why the observations of behavioral economist Teresa Ghilarducci could just as well apply to lovers as to investors. According to Ghilarducci, "[Investors]...tend to focus on the short term rather than thinking about the long-term consequences." Investors also "...tend to think that whatever the current trend is will always be the trend." So, like lovers, investors tend to make emotional instead of rational decisions.

The repercussions of these emotional acts often can be devastating. Just ask Joe Nocera, a well-known business journalist and author who admitted in a recent New York Times column (April 27, 2012), that his "...401(k) plan...is in tatters." Like some kind of irrational financial Romeo in a Shakespearian investment tragedy, Nocera counts the ways his unchecked emotions decimated his retirement savings.

Nocera says his first mistake was arrogance. Early success driven by the "...great bull market..." gave him "...an inflated sense of [his] investment skills." Thinking he was a Casanova of investing, he eschewed diversification and instead concentrated his portfolio in the hot sectors of the time. His next mistake was not tempering his attitude with reason. Flush with success and overconfident in his abilities, he went all in with the tech bubble. When the bubble burst, his account "...was cut in half."

A divorce cut Nocera's account in half again. That loss, along with the emotional impact of the market crash in 2008, led to his most recent mistake: capitulation. Having lost at love and failed at finances, he reasoned, "...that I might as well get some use out of the money while I could..." So he took "...another chunk..." out of his 401(k) to renovate his house.

Assessing the damage, Nocera acknowledged that a good financial advisor would have advised him "...to be disciplined, to create a diversified portfolio, and to avoid trying to time the market." But, Nocera says, "Sound as that advice is, it's just not how humans behave." On that point, I could not disagree more. As humans we do have the ability to control our behavior. Just because nature has given us investment I.Q.s in the Forrest Gump range, doesn't mean we have to do stupid things. Investment success has little to do with brains and everything to do with actions. That's why the best financial advisors, says Benjamin Graham (Warren Buffett's mentor) "...don't need extraordinary insight or intelligence. What they need most is the character to adopt simple rules and stick with them." And that's how smart investors avoid being stupid. Because "Stupid is as stupid does."

In fifth and sixth grades I played clarinet in the Sycamore Elementary School band. I suspect that those two years of dealing with me caused our band director to switch from teaching to school administration. I remember during one practice session, he stopped and looked down at me in frustration and exclaimed, “You are the only person I know who taps his foot in one time and plays in another time, and neither one of them is right.”

That fact that I totally ignored his direction probably accelerated his decision to abandon teaching. To me, my job was to play every note and whether or not they were played at the right time made no difference to me. So if I got behind, instead of jumping to the appropriate place, I would just play faster until I caught up - which I rarely did. As a result, I usually had three or four notes left to play when he gave the signal to stop. And since everyone else obediently obeyed, I almost always ended every performance with a short solo.

While short, my solos produced sour notes, not sweet music. According to Sir James Jeans in Science and Music, “…the aim of music is to weave elementary sounds… into combinations and sequences which give pleasure to the brain…” As an investment advisor I have likewise learned that successful investing requires the arranging of appropriate financial instruments into prudent combinations that are bought and sold in the correct sequences. Curiously, if the process brings pleasure to the brain, it is being done wrong. As investment manager and finance professor Robert Arnott so aptly explained, “In investing, what is comfortable is rarely profitable.”

Michael J. Mauboussin, the Head of Global Strategies for Credit Suisse, explains why good investing feels wrong. In the left hemisphere of the brain there is a part “…that neuroscience has dubbed ‘the interpreter’ [that] assigns a cause to every effect it sees.” And while it is very effective most of the time, it “…stumbles when confronted by randomness [which] presents a problem [for] investors.” This problem, which academics refer to as the “dumb money effect,” manifests itself in two costly ways. First, investors buy actively managed funds and second, they trade on emotions -- they fearfully sell in down markets and greedily buy in up markets.

Unfortunately, like my tapping and playing, neither one of them is right. Mauboussin points out that “…the annual return for the average actively managed mutual fund was 1.0 to 1.5 percentage points less [than] the S&P 500 Index.” And this bad product choice was made worse by the “bad timing” of buys and sells that causes investors “… to earn… another 1.0 to 2.0 percentage points less than that of the average actively managed fund… This means that the investor return [for the past 20 years] was roughly 60 to 80 percent that of the market.”

Most investors underperform for the same reasons I underperformed as a musician: bad choices and bad timing. That’s why investors need what I needed, good direction. Barbara Palmer, in the Stanford Report, wrote “A good conductor looks…to the composer and then convinces players to accept his vision.” For investors, the composition to look to is the body of economic knowledge known as Modern Portfolio Theory. However, because these economic principles run contrary to our normal mode of thinking, most investors ignore them like I ignored my band director. So if investors don’t want to fail, like I failed at music, they need to accept a vision about investing that is based on the often sour sounding notes of economic truths. But, Mary Poppins taught us “a spoonful of sugar helps the medicine go down.” So, I write my newsletters short and sweet.

“Oh, about a thousand times,” was his answer to both questions. But even though the words were the same, the sentiments were different. The first was factual and the second revealing.

I had gone out to play golf and ended up being paired with a gentleman I had never met. Upon learning that he was a retired Navy pilot, my curiosity caused me to ask my first question. “Did you ever land on an aircraft carrier?” And his affirmative response led logically into my second question. “Were you ever afraid?” The fact that a thousand repetitions hadn’t eliminated his fears was very telling.

According to G. Warren Hall, a NASA test pilot and retired Navy pilot, it is always scary landing on an aircraft carrier, but there is noticeable “pucker factor” to night landings. He says, “pucker factor” is knowing you're betting your life on a nearly perfect performance - but with less-than-perfect information, in a harsh environment, with anxiety at its peak, and when you don't feel comfortable because you don't fly enough at night to feel comfortable or proficient.”

In his book, Your Money and Your Brain, Jason Zweig says it is “…no different when it comes to money. Every investor’s worst nightmare is a stock market collapse…” And since the Great Recession of 2008, the pucker factor of that fear has greatly intensified. John Bogle, the founder of Vanguard Funds, in a New York Times article, described the current investment environment as “…the worst…for investors that I have ever seen – and after more than 60 years in the business, that’s saying a lot.” In the Black Swan, Nassim Taleb says, “We have never lived before under the threat of a global [financial] collapse… I shiver at the thought.”

Plane crashes and stock market crashes are both so frightening, explains Zweig, because the mental imagery of “…the consequences of a crash…[are] so horrific, while the probabilities of a crash evoke no imagery at all.” Daniel Kahneman, in Thinking Fast and Slow, adds that “…we tend to judge the probability of an event by the ease with which we can call it to mind.” That’s why a survey referenced by Zweig found that investors believe “…there’s a 51% chance that in any given year, the U.S. stock market might drop by one-third. And, yet, based on history, the odds…are only around 2%.”

While you would have to be a fool not to be afraid of the stock market, prudent investors need to rationally assess the risk. By obsessing on the consequences and overestimating the probability, we tend to overstate the risk. As my studies and Zweig’s writings explain, “The real risk is not that the stock market will have a meltdown, but that inflation will raise your cost of living and erode your savings.” He continues by saying the vivid fear of a stock market crash causes investors to “…overlook the more subtle but severe damage that can be dealt by the silent killer of inflation.”

My new golfing buddy confirmed that the “pucker factor” of a night carrier landing is an eleven on a scale of one to ten. He told me, “You can’t imagine the adrenaline rush. It’s terrifying and exhilarating at the same time.” With emotions running so high, he said, pilots need to strictly follow procedures to keep from making deadly mistakes. Investors need to do the same thing. That’s why, as fiduciaries, we follow a prudent process that balances risk and return. So “…long-term investors must hold stocks, because risky as the market may be, it is still likely to produce better returns than the alternatives,” says Bogle. And if I have said that once, I have said it “Oh, about a thousand times.”

Not long ago I received an email from a niece, Claire, who robs trains on weekends. Actually she does Old West reenactments. This particular email related a conversation she had with the engineer of a locomotive she had just held-up. Having discovered in her genealogy pursuits that her great-great grandfather (my great-grandfather) had been killed by an exploding boiler on a steam ship, she had some questions about the causes of such explosions. Claire explained that our ancestor, John Bradbury, had been killed in 1853 aboard the Jenny Lind, a steamboat operating in the San Francisco Bay. What she wanted to know was, “What was different about steam-powered boilers now versus those that were exploding so frequently in the mid-1800s?”

The answer surprised her, “Nothing.” The materials, the wall thicknesses, rivets and basic design practices all remain relatively unchanged. What has changed are the maintenance practices. Today’s boilers are cleaned every month and they run only softened water through them. In John’s time, boilers were regularly inspected and the Jenny Lind had just recently passed such an inspection. Since there were no obvious structural problems, this suggests that the engineer may have been correct in his assertion that the explosion was due to maintenance problems.

According to Claire, the engineer described two scenarios that could have caused the Jenny Lind’s boiler to explode: low water levels or sediment in the water. Interestingly, I have found that retirement portfolios rupture for similar reasons. Allowing water levels in a boiler to drop to hazardous levels is a perfectly avoidable catastrophe caused by negligence. Likewise, low funding levels in retirement accounts are caused by inattention. Throughout the accumulation stage, workers need to diligently fill-up their retirement accounts. Once distributions begin, retirees must constantly monitor portfolios to ensure that excessive spending doesn’t dangerously drain their accounts.

Even if water levels are adequate, sediment accumulation can cause a boiler to suddenly explode. It’s my understanding that excessive heat retained in the sediment weakens adjacent walls. Similarly, retirement portfolio failures are caused by overheated emotions that undermine sound investment strategies. For boilers, the solution to this problem is soft water that is free of impurities. For portfolios, the solution is disciplined strategies that are free of counterproductive emotional responses.

Fear and greed are two of the most powerful emotions that muddy our thinking. Without a clear plan that is diligently followed, the pressure to sell stocks in declining markets and buy them in rising markets is too strong to resist. But instead of learning our lesson after repeated failures to maintain discipline, investors are often enticed to avoid future disasters by filling their portfolios with murky alternative investments and other complex strategies.

Sediment in the water was most likely the cause of the Jenny Lind explosion, because in the 1800s steamships that traversed the southern end of the bay regularly filled their boilers with muddy water from the shallow sloughs in the area. Whether it was sediment or low water levels, the remedy is the same: a disciplined maintenance program. Similarly, for avoiding financial failure in retirement the solution is found in preserving adequate fund levels and maintaining disciplined investment strategies.