Why behaviour is more important than information when investing

Recently I googled “How to invest successfully” and I was staggered to find “about” 67,600,000 results. Granted many of these sites might not be relevant but I think it is fair to say there is no shortage of information available to the would-be investor.

If I were a DIY investor there are two questions I would ask:

  1. What sites to use for information?
  2. Will they actually help me become successful in investing?

Question 1 Is probably fairly easy to answer by narrowing the search to UK based sites and those which are clear and concise. Question 2, however, is a different matter.

If I now put my Financial Planner head on, the evidence I have seen is that the most dominant factor in investment success is behaviour not information.

For example, I believe that an investor with little (but relevant) information and “good” behaviour (not reacting to markets highs/lows and maintaining discipline) will likely outperform an investor with lots of information but “bad” behaviour (reacting to market highs/lows, concentrating a portfolio, etc).

Maintaining “good” behaviour is simple but not easy. Not reacting to the cacophony of noise from the media, which tends to accompany times of market turmoil, is very difficult. For example the JP Morgan Guide to the Markets reports that the UK Stock Market had positive years 71%* of the time between 1986-2016 but from my experience most of the media coverage centred around the negative events (the dot com crash, the credit crunch, etc)

My conclusion? Rather than trying to find the “best “investment with the “best” information set up a simple investment and maintain “good” behaviour.

Have a great weekend


* Source : JP Morgan : Guide to the markets Q3 2017

 This article should not be considered investment advice or an offer of any product for sale, it contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular, strategy or investment product. Information contained has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not an indicator of future results.

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