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Relying on guidance from historical returns is the number one investment mistake made by millionaires, reveals a new global survey.
The survey was carried out by deVere Group, one of the world’s largest independent financial advisory and fintech organisations, and queried 752 investors with investable assets of more than £1m (or the equivalent) in the UK, Europe, Asia, Africa, the Middle East, Australasia, Latin America and North America about their biggest errors whilst investing before they became clients.
The top cited mistake (38%) was reliance on historical returns, the
second (35%) was not having sought advice, and the third (21%) was lack
of diversification. A collection of other mistakes and ‘do not knows’
made-up the remaining 6%.
deVere CEO and founder, Nigel Green, says: “It’s interesting to see that for the first time in our surveys of this kind that the number one
investment mistake high-net-worth individuals have made is, they say,
reliance on guidance from historical returns.
“To me, this suggests that wealthy investors are paying attention to how the world has changed dramatically this year and, therefore, investment strategies need to adapt and evolve too in order to reflect the new era
we’re living in.
“With fundamental shifts in economies and the markets, the often-quoted industry phrase ‘past performance is not a reliable indicator of future performance’ has perhaps never rung more true than it does today.”
He continues: “It’s encouraging that seeking advice is deemed
fundamental to success by millionaires as it shows that DIY investing and not having a regularly reviewed plan is, typically, a path full of
costly pitfalls.”
Mr Green goes on to add: “The lack of diversification was in some ways
bound to make the top three. Why? Because it is universally regarded as an investor’s best tool to mitigate risks and capitalise on
opportunities that arise.”
The fact the top three mistakes are all fairly close in percentage terms
says to the deVere boss, “that, in fact, they all link in pretty tight
to number two – that’s to say, having a robust, considered and
consistently reviewed strategy for your personal finances.”
Mr Green concludes: “To some, this could appear as if investing your
hard-earned money is dangerous.
“Yet nothing could be further from the truth – not investing is likely
to be more dangerous to your wealth over the longer-term.
“This is shown by the fact that most of the world’s wealthiest people
are themselves committed investors.”
