Failing to appropriately diversify portfolios is the top investment mistake high-net-worth (HNW) investors make before they sought financial advice, according to an international poll conducted by deVere Group.
According to the report, 27% of the respondents cited failing to appropriately diversify portfolios as their top mistake.
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Other errors included not investing earlier (23%), focusing too much on the short-term (20%), being emotional over investments (15%), and not keeping enough cash in reserve (8%). A further 7% did not know or did not respond.
652 deVere clients from the UK, Africa, the Middle East, Asia and the US who have investable assets of more than £1m participated in the survey.
Regarding the poll’s results, deVere Group founder and CEO Nigel Green said: "Ensuring your portfolio is properly diversified is one of the fundamentals of successful investing. Yet it is surprising how many people fail to do this. Having a well-diversified portfolio across asset classes, sectors and regions means you are best-placed to mitigate risks and best-placed to take advantage of important opportunities.
"All too often even experienced investors focus on the short term heavily and there are many disadvantages to this. Typically, a short-term investment strategy involves considerably higher risks, compared to investing over a longer period. Other pitfalls of a short horizon include that investors can often sell a quality investment too early due to over focusing on short-term valuation metrics. Alternatively, they may sell an investment if it drops in the short term, meaning that they would then miss out on it potentially growing steadily in the longer term with increasing returns."
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By GlobalData"Stock market performance is fairly predictable over the longer-term – they usually go up. For this reason, investing in equities is recognised globally as one of the optimum ways to accumulate wealth over long periods. If you put off investing you are likely to miss out on the long-term benefits you could have been gaining," he added.
"Making decisions based on heartfelt emotions and loyalty are admirable traits in most parts of life – but not when it comes to investing. Investment decisions based on pure emotions, such as fear, greed, or the desire to follow the crowd, amongst others, can be disastrous. Objectivity is key.
"Finally, not having kept some powder dry is another common error highlighted by many investors. It is always advisable to have some cash at the ready and be prepared to use it should a clear trend and/or opportunity present it itself," Green concluded.
