5 min read

Nick Murray's Six Variables of Investor Success

If I told you that six variables account for upwards of 90% of your long-term investment returns, would that grab your attention?

That's what Nick Murray, an author and financial professional of the last 50 years, believes. Because of his background working as a Financial Advisor, Murray brings a unique perspective on what translates to success. He believes strongly in the relationship of working with an Advisor (no surprise), while acknowledging that investors can find success without one.

What really sets Murray's perspective apart from so many others, is what he believes the value add of Advisors are. In a world fixated on returns, seemingly at whatever cost, he believes that portfolio selection (as long as it's appropriate) has a negligible value add. He believes that an Advisors value comes from:

  • Setting a client up for success: building a unique financial plan and having appropriate investments.
  • Continuous behavioural coaching: sticking to your plan and avoiding a big mistake.

Murray says something along the lines of, being a successful investor is simple, but it isn't easy. What he means is that what we need to do isn't overly complicated, it's about doing the little things right for a very long time. The not easy part is being able to stick to a plan, especially for a very long time or during market turbulence. So although what we need to do is simple, regularly doing it isn't easy.

The dominant determinant of long-term, real-life return is not investment performance, but investor behaviour.

Below are the six variables, three principles and three practices, that he believes every investor should focus on in order to succeed over the long-term.

Key Takeaways:

  • The three principles are: Faith in the Future, Patience, and Discipline.
  • The three practices are: Asset Allocation, Diversification, and Rebalancing.
  • Long-term success is more about investor behaviour than investment performance.

Faith In The Future

Long-term investing comes down to a battle of the unconscious mind – one between faith in the future and fear of the future. The outcome, is greatly governed by which one of these impulses win.

At every point in time, there have been reasons to be pessimistic about the present and future. And yet in almost every measurable criteria, the world has gotten better. Anyone examining history can clearly see the progress that's been made, and is continuing to be made. Optimism is the only realism.

This progress hasn't been linear, but exponential. Advancements in medicine, science, technology and economies, even over the past 10 years would blow someone away from just a couple of generations prior. Today, a microprocessor in a minivan contains more computing power than all that existed in 1950.

As investors, we are investing in tomorrow, we are planning for tomorrow. The road isn't straight and smooth, there will be curves and bumps, sometimes big ones. But we can have faith in what has always been the case, that things are always getting better, progress is always being made.

I can't know exactly how things are going to turn out all right. I just know that things are going to turn out all right.


We live in a world of constant pressure to do something, where sometimes the hardest thing to do is nothing at all. The more an investor chases what's hot, the more they lose sight of their financial goals, and what is required to achieve them.

Studies show that this behaviour leads to mistakes, which leads to lower returns, which actually puts an investor further away from their goals. It's a situation where doing nothing, would have resulted in a better outcome. Instead of chasing returns, there's two things you can ask yourself of your portfolio:

  • Is it appropriate to the realization of my long-term financial goals?
  • Has it historically resulted in returns that can adequately fund my goals?

At times they won't be, markets will be down, short-term returns will be negative. But historical data takes into account all of the good and all of the bad. Historical averages already take the bad years into consideration.

I can't know when it's going to turn out all right. I just know that it's going to turn out all right.


If patience is the decision not to do something wrong, discipline is the decision to keep doing the right things. During market volatility, our discipline is tested – not just during lows but during highs.

When markets are at highs, it's not the right time to be overly enthusiastic and bet it all. When markets are at lows, it's not the right time to be scared and stop investing all together. The disciplined investor continues to act in the same way regardless of what the market is doing, because when discipline fails, the plan fails.

I don't care what's working right now. I care about what's always worked... and I'm just going to keep doing what's always worked.

Asset Allocation

Asset allocation is the long-term mix of stocks, bonds, and cash within your portfolio, which makes up to 93% of a portfolios returns and volatility.

Proper asset allocation doesn't eliminate volatility, but puts us in a position to take advantage of it. Markets naturally move up and down, but over the long-term, more so up. Volatility is the price we pay as investors for our returns, and history shows that the more volatility we have, the higher the long-term returns we can expect.

As investors, we should embrace volatility because we know that it leads to higher long-term returns. This means having more weighting in our portfolios to stocks, and less to bonds and cash. If you're not happy with your returns, it's likely that you're not efficiently investing.


If asset allocation allows us to capture volatility, diversification allows us to survive it. No one knows what the best performing anything will be over the next any amount of time. So within each category of asset: stocks; bonds; cash, it's important to own a mix.

During times of downtrending markets, diversification spreads out the risk among many companies, countries and industries. Putting us in a position of confidence that markets will rebound, like they always have, because we are investing in a way that has always worked.

I will never own enough of any one thing to be able to make a killing in it. I will never own enough of any one thing to be able to get killed by it.


Over time, as different portions of your portfolio perform differently, the design of your portfolio will shift a little. Maybe taking your portfolio from 80/20 to 70/30 (stocks/bonds).

Since we know that markets naturally move, what goes up likely is to come down, and what goes down is likely to come back up. Rebalancing can move assets back into what we'd expect to perform well in the short-term, while keeping your portfolio aligned with your risk tolerance and goals.

It's important to maintain an automatic or systemized rebalancing approach. Selection and timing the market doesn't translate to long-term returns, and by considering the market at any point in order to make a rebalance will waste time and effort. Automate rebalancing without any bias on an annual basis.

Keep doing things your future self will thank you for.