In past surveys by the deVere Group, wealthy investors have cited failing to adequately diversify their portfolio and not having a financial plan earlier in life as their top regrets. This time around, their biggest mistake, they say, is relying on guidance from historical returns.
The Zurich-based financial advisory firm queried millionaires on the biggest investing errors they made before they became clients. The survey included 752 investors with investable assets of more than $1 million in the United Kingdom, Europe, Asia, Africa, the Middle East, Australasia, Latin America and North America.
More than a third (38%) of investors said they leaned too heavily on historical returns; not far behind was 35% who cited not having sought advice; and coming in third at 21% was lack of diversification. The survey said a collection of other mistakes and ‘do not knows’ made up the remaining 6%.
It is the first time in the survey’s history that wealthy investors ranked reliance on guidance from historical returns as their top mistake, deVere CEO and founder Nigel Green noted in a statement. “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,” he said.
Green said with fundamental shifts in economies and the markets, the industry phrase "past performance is not a reliable indicator of future performance" has perhaps never rung truer than it does today.
“It is 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,” he said.
Green further noted that the lack of diversification was in some ways bound to make the top three because it is universally regarded as an investor’s best tool to mitigate risks and capitalize on opportunities that arise.
He also pointed out that the top three mistakes are tightly linked to investors not having sought advice, he said. But investing your hard-earned money could appear as dangerous to some, Green posited.
“Yet nothing could be further from the truth," he said. "Not investing is likely to be more dangerous to your wealth over the longer term."