American behavioural investment guru Nick Murray delighted IFP Conference delegates with an insight into how investors behaved during the so-called “lost decade” from 2000 to 2009 when investment returns tumbled to historical lows.

Mr Murray cited the example of the CGM Focus Fund in the US which was one of the few to produce positive returns on average throughout the decade.

He said as the fund reached an all-time high investors piled in and just as the “last cheque was being cashed” the fund crashed, highlighting the dangers of the investor herd instinct.

In a keynote speech peppered with amusing anecdotes, Mr Murray told delegates that the message was mostly to buy out of favour stocks and investments and avoid buying anything at an all-time high or near a peak.

Mr Murray said Financial Planners should avoid trying to predict the markets and returns because it was impossible to do so. Instead they should focus on investor behaviour.

He said: “The dominant determinant of real life returns and outcomes is not investment performance, it’s investor behaviour.”

He gave delegates advice too on the types of clients to aim for suggesting that it was virtually impossible to recommend equity-linked investments to investors who had no “faith in the future” and were nervous about investing.

These people were natural “savers not investors” and planners should separate the two because their behaviour was very different.

He said planners should beware the news media trumpeting bad news. He said while there was huge focus on the Greek debt story, even though Greece had a long history of bad debt, news media had ignored the fact the world wealth grew by 8 per cent last year.

In other advice to delegates he recommended “patience” and “ working the plan” – sticking to the original financial plan and avoiding getting blown off course. He also said financial discipline was key.

The key to the future with greater longevity becoming apparent was working out the correct “stock-bonds mix” for investors who had 30 years or more to fund post retirement. It would be a critical issue, he forecast.

Nick Murray is President, The Nick Murray Company, Inc. He is in his 45th year in the profession of financial advice. He is one of the industry's premier speakers, and the author of 11 books for financial services professionals.