Four Investing Mistakes the Ultra-Wealthy Don’t Make

24 Sep, 2021

Buying stocks and making investments is becoming more popular in the UK, particularly as many people found themselves with extra time on their hands during the pandemic. Investing can be a great way to supplement your income or prepare for retirement. However, not all investments pay off and a poor choice could cost you a significant loss.  

Investing can be a risky business, but there are some people, particularly those who fall into the ultra-high-net-worth category, who appear to have a stream of continual income no matter what. 

This raises the question of what they do to achieve such success. Are there specific strategies investors and wealth managers can follow to avoid financial disappointment? Read on to find out the four investment mistakes the ultra-wealthy don’t make. 

How do we define ultra-wealthy?

The ultra-wealthy are high-net-worth individuals who own assets valued over £10 million. In the UK they are typically above middle age, although as more young people take an interest in investments the average age of the ultra-wealthy may drop in the future. 

  • Investing in anything and everything 

The ultra-wealthy are very particular about which companies and markets they invest in. The preferred choices are businesses which focus on just one thing and do it well. These businesses often do something which is fairly niche and cannot easily be copied by a start-up. This ensures they will not be threatened by competition and the business is more likely to stand the test of time. 

  • Failing to plan ahead  

If you’ve no sense of direction, you’ve got no way to move forward, so setting benchmarks is the key to building personal wealth. The ultra-wealthy set personal investment goals and long-term investment strategies before jumping into any decisions. They consider their ideal future and determine where they want to be five, 10 and even 20 years down the line. 

Once they have mapped out their future plans, the ultra-wealthy will stick to an investment strategy that will help them reach their targets. While their peers may be tempted to jump ship if economic downfall becomes an issue, they do not allow it to sway their decision. 

  • Comparing themselves to others

There’s a time and place for competition and it’s not in the stock market. The ultra-wealthy are aware of what can happen when people get caught up in the comparison trap. 

While their fellow investors may splurge on an expensive sports car or a second home, they avoid following suit. Instead, they bide their time and invest the money they have to compound their investment returns, knowing that while it may take longer, the payoff is worth the wait.

  • Letting their emotions get in the way

They say that fear and greed rule the investment market, and it’s not far from the truth. Successful investors focus on the big picture and do not let their emotions influence their decisions. 

Over a short timeframe stock market returns can vary, however long-term a portfolio’s return is not expected to drop from the average percentage of return.