6 Mistakes High Net Worth Investors Make

Traditional economic theory is based on the idea that investors make rational decisions. However, humans are emotional beings, which means investment decisions can sometimes be driven by emotional factors.

Indeed, the latest Capgemini World Wealth Report 2024 discovered that 65% of high net worth individuals are influenced by behavioral finance biases when making investment decisions—especially during emotional life events such as marriage, divorce and retirement.

Throughout their lifetime, investors make many decisions including whether to buy physical gold and silver or rare coins, real estate, stocks and bonds and in what proportion to each other, or allocation levels.

Emotional investment decisions can have a long-lasting impact on your financial goals and your financial security. Do you recognize any of these six investment biases, which Capgemini found impact high net worth individuals (HNWI)?

1. Confirmation bias: This refers to the idea that you seek information from sources that already aligns with your views. 65% of HNWI were susceptible.
2. Activity bias: This means you are open to grab opportunities without extensive deliberation. 47% of HNWI were susceptible.
3. Disposition effect: This means you hold onto bad-performing investments for an extended period. 45% of HNWI were susceptible.
4. Risk aversion: This means you are too conservative to grab potential opportunities. 43% of HNWI were susceptible.
5. Anchoring bias: That means sticking to past investment decisions without regular re-evaluation. 43% of HNWI were susceptible.
6. Overconfidence: This means you invest based on your own market predictions. 37% of HNWI were susceptible.

If you recognized any of these biases, you aren’t alone. They are very common and even among high-net worth individuals. However, when you are making investment decisions, you want to ensure you are making the right decision for your financial future. Fortunately, there are four simple strategies you can employ to help you avoid these behavioral finance traps, and Blanchard is here to help.

Set Clear Investment Goals

What are your financial goals? Blanchard will take the time to learn your investment objectives, investment time horizon and risk appetite before recommending products for your consideration.

Invest for the Long-Term

Blanchard’s investment philosophy is based on a long-term outlook. We believe in the long-term investment value of high end rare and ultra-rare coins. Download a 45-year study on the long-term investment performance of gold bullion and U.S. rare coins to learn more about performance returns.

Diversify Your Portfolio

Gold and silver bullion in physical form is an appropriate asset for a portion of any properly diversified investment portfolio. We recommend investing up to 10% of your overall portfolio in gold, depending on your financial goals and risk tolerance levels. Learn more about a proven gold diversification strategy.

Rely on Proven Professionals

Talking with a financial professional before you make an investment decision can help alleviate some or all of the investment biases shown above. Take the time to get a second opinion and professional guidance with your most important investment decisions.

Blanchard believes that most of our clients benefit by talking to one of our Portfolio Managers before they make a purchase. The precious metals market is complicated and in constant flux. We follow it closely and getting a second opinion before you buy can dramatically improve your purchasing power and help you avoid making a bad purchase. We can also help educate you on topics such as IRA’s, inheritance, storage, diversification and many more topics.

Investing doesn’t have to be complicated, nor ridden with bad emotional decisions. If you follow these four steps it will help you feel confident and secure that you are moving your financial future forward. Blanchard is here to help

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