The pursuit of financial success is a journey often paved with good intentions, yet even the wealthiest individuals can find themselves stumbling and making costly mistakes along the way.
It's a common misconception that vast fortunes somehow protect against poor financial decisions. In reality, millionaires are not immune to the pitfalls that can jeopardize wealth and hinder the achievement of financial goals.
This vulnerability has been brought to light by a new global survey of millionaires, conducted by deVere Group, one of the world's largest independent financial advisory organizations.
The survey revealed that even the richest individuals fall victim to common investing errors, highlighting key areas where investors of all levels can improve their strategies.
More than 230 high-net-worth individuals, each with investable assets exceeding P87 million, participated in this study. The survey uncovered three major pitfalls that frequently sabotage financial success: an outdated belief in the supremacy of cash, the tendency to let emotions dictate investment choices, and an over-reliance on historical returns as a predictor of future performance.
These are not merely theoretical concerns; they are real-world challenges faced by those who have already achieved financial success.
‘Cash is King’ – A dethroned monarch?
The most common mistake, identified by 44 percent of respondents, was an excessive reliance on cash. While cash plays a role in a balanced portfolio, holding onto it for too long can be detrimental.
"Excessive cash holdings often erode real value over time due to inflation," explains Nigel Green, CEO and founder of deVere Group. "In addition, cash doesn’t generate returns or allow investors to take advantage of opportunities in equities, real estate, or other growth sectors."
Green emphasized the importance of deploying cash strategically across diverse, income-producing assets to achieve true wealth growth. This sentiment challenges the traditional "cash is king" mentality, particularly in a dynamic market environment.
Emotions: The investor's worst enemy
The second most common mistake, highlighted by 31 percent of respondents, was allowing emotions to dictate investment decisions. Fear and greed often lead to impulsive actions, such as panic selling during market downturns or chasing high-risk investments at market peaks.
"The market rewards those who remain objective and disciplined," Green said. "Emotional investing rarely leads to sustainable returns."
He stressed the importance of a robust financial strategy, guided by expert advice and aligned with long-term objectives, to mitigate emotional pitfalls and avoid the common trap of buying high and selling low. Professional advice provides an objective perspective, helping investors stay the course and make rational decisions.
The past is not a prologue
The third most prevalent mistake, identified by 21 percent of respondents, was an overreliance on historical returns when making investment decisions. Many investors mistakenly believe that past performance guarantees future success, potentially overlooking emerging opportunities.
"The classic financial disclaimer says it all: ‘Past performance is not an indicator of future results,’" noted Green. "Markets evolve rapidly, and strategies that worked a decade ago—or even last year—may no longer deliver the same outcomes."
He highlighted the importance of evaluating the current market landscape and anticipating future trends, particularly with megatrends like AI, clean energy, and digital assets reshaping the global economy. Successful investors focus on forward-thinking strategies to capitalize on these emerging opportunities.
Lessons for every investor
While the survey focused on millionaires, Green stressed that the findings are relevant for all investors, regardless of their net worth.
"These common mistakes are not unique to the wealthy—they are universal," he said. "Whether you’re a millionaire or just starting out on your investment journey, the same principles apply: avoid sitting on too much cash for too long, keep emotions in check, and always look forward rather than backward when making decisions."
He concluded by emphasizing the importance of reevaluating ingrained habits and seeking expert financial planning.
"Financial success is as much about avoiding mistakes as it is about making smart moves," Green asserts. "By addressing these top three mistakes, investors at all levels are positioned to maximize returns, safeguard wealth, and seize the opportunities of tomorrow.”
While the survey focused on the three most common mistakes, other pitfalls were also identified, including lack of diversification and investing without a clear plan.
These factors further underscore the need for a well-defined investment strategy tailored to individual goals and risk tolerance.