05 Jun, 2014
Millionaires reveal their top five past investing mistakes
top five most common mistakes made by millionaires are failing to
diversify, investing without a plan, making emotional decisions, failing
to review a portfolio, and placing too much focus on previous returns,
finds a poll by one of the world’s largest independent financial
In the global deVere Group survey of 880
high-net-worth clients, when asked to reveal their number one investing
mistake before seeking professional advice from deVere, 23 per cent
cited failing to adequately diversify their portfolio.
cent responded investing without a plan, 20 per cent said it was making
emotional decisions, 16 per cent answered failing to regularly review
the portfolio, and 14 per cent claimed it was focusing too heavily on
the history of an investment’s returns. 5 per cent cited other errors,
including impatience, investing near the top of the market, adhering to
recommendations from acquaintances, and paying tax on the investments
unnecessarily, amongst others.
Those polled by the organisation,
which has more than 80,000 clients worldwide, are based in the U.K.,
the U.S., South Africa, Hong Kong, Japan, the UAE, Indonesia and
Thailand and have investable assets of more than £1m.
survey, Nigel Green, deVere’s founder and chief executive, observes:
“Interestingly, there are minimal differences between the top five most
common investment mistakes previously made by high-net-worth
“This close weighting could suggest that, according
to the respondents, all of them are almost equally as significant and
costly – and therefore must be avoided.”
On the breakdown of the
poll, he continues: “As the survey highlights, failure to diversify a
portfolio is widely regarded as one of the most common investment
pitfalls. Spreading your money around is a vital tool to manage risk.
However, it must be used correctly. Diversification will only add real
value if the new asset has a different risk profile.
underscores how 22 per cent of today’s millionaires have also in the
past fallen into the all-too-familiar trap of randomly investing, or
investing without a structured, robust plan. Anyone who has an
investment plan can expect their portfolio to outperform those without a
plan. To my mind, unless you have a sound investment plan you are
gambling, not investing.
“Most decisions in life are emotional
to some degree but making excessively emotional decisions can prove
deadly when it comes to investments because they are blighted by
prejudices and biases. Working with an independent financial adviser is
one recommended way to help take excessive emotion out of the equation.
per cent of respondents cited that failure to review their portfolio on
a regular basis was their number one investment mistake. This is not
surprising as even the best portfolios can go off-target over time.
Investments need to be reviewed and potentially rebalanced at least
annually, preferably more often, to ensure they still deserve their
place in the portfolio and that they are still on track to reach your
long-term financial objectives.
individuals told us that they have in the past been caught out by
relying too much on historical returns and not giving enough importance
to future expectations. The future investment situation is likely to be
different from time-aged averages. Past averages may have little bearing
on the current environment and therefore the actual returns you
deVere Group’s CEO concludes: “Mistakes investing can
and do occur – it is how they are best avoided, or at least mitigated,
that is the key to success. Learning lessons from people, like those we
polled, who have overcome these common investment mistakes to go on to
accumulate significant wealth in the longer-term is a way to reduce
“Due to the complexities of investing and the
potentially devastating effects of committing expensive avoidable
errors, the best thing to do is to seek advice from a professional
independent financial adviser who will help circumnavigate the common
and not-so-common pitfalls. Avoiding just one of these mistakes – and
there are many others – can literally make the difference between
poverty and financial freedom.”