IFP Conference: The six principles and practices of behavioural investing

Faith in the future, patience and discipline have been highlighted as three of the key principles of long term investing.

In a keynote speech closing out the second day of the Institute of Financial Planning conference in Newport, Nick Murray detailed the six key practices and principles which would determine 95% of long term, real life investment outcomes.

A veteran of the financial advice profession in America, Murray insisted investment outcomes were driven more by investor behavior than investment performance.

The three principles:

Faith in the future

Forget about the latest crisis or market problems and have some basic, fundamentally faith-based idea of the future. If you believe, you will be believed.

Patience

Keep doing the right thing and work the plan patiently. Even if the market goes down 30%, work the plan patiently.

Discipline

Avoid doing the wrong thing and going off the plan, even if the news is bad.

The three practices:

Asset Allocation

Get the long term stocks bonds mix right. This will determine whether the client is going to outlive the money of if the money will outlive the client.

Diversification

If you ensure you don't own enough of any one thing to make a killing on it, you will never own enough get killed by it. 

Rebalancing

Once a year, rebalance the portfolio and force yourself to take money out of anything that's outperformed and put it into something that has underperformed.