"Smart investing” ranks closely behind hard work and education as the factors Affluent investors consider most integral to their financial success.
Buoyed by confidence in their investment knowledge and acumen, a majority of Millionaires profess that the like investing and that it is something they would not want to give up. What are the factors that these elite investors primarily consider when they make an investment?
"Smart investing” ranks closely behind hard work and education as the factors Affluent investors consider most integral to their financial success. Enthusiasm for investing and engagement with the day-to-day management of their portfolios increases with wealth level, according to wealth level studies conducted by Spectrem’s Millionaire Corner. Four-in-ten non-Millionaires with a net worth of at least $100,000 report that they enjoy investing, while just over one-third (35 percent) said they like to be actively involved in managing their investments.
In comparison, half of Millionaires with a net worth up to $4.9 million (not including primary residence) say they enjoy investing (53 percent) and tending to their investments (51 percent), while high net worth investors with a net worth of at least $5 million are even more personally engaged with their investments (62 percent and 61 percent, respectively).
There is, too, a correlation between wealth level and the importance Millionaires place on having investment knowledge. Nearly nine-in-ten (88 percent) of Millionaires say that that financial knowledge is “extremely important” or “important” to them, compared with 82 percent of non-Millionaires with a net worth of at least $500,000 and 74 percent of those with a net worth of less than $100,000.
Accordingly, the wealthiest investors self-report greater financial knowledge than their less wealthy cohorts. Four-in-ten high net worth respondents consider themselves “very knowledgeable” investors, vs. 22 –percent of Millionaires with a net worth up to $4.9 million, and just 11 percent of non-Millionaires.
Younger Affluent investors, especially have a high self-regard for their investment knowledge. More than half (52 percent) of high net worth investors under the age of 45 consider themselves very knowledgeable, as do 31 percent of their Millionaire counterparts. Nearly four-in-ten (39 percent) investors under the age of 45 stated they could do a better job of investing than a professional advisor. In comparison, one-fourth of Affluent respondents overall share this attitude.
Across wealth levels, risk is the primary factor Affluent investors consider to be most important in selecting an investment. More than nine-in ten Millionaires and high net worth investors cited this concern vs. 88 percent of non-Millionaires.
Diversity of investments gets near equal consideration from the wealthier investors (89 percent of high net worth respondents and 88 percent of Millionaires). High net worth investors are also more likely to take into consideration an investment’s tax implications (81 percent vs. 76 percent of Millionaires and 71 percent of non-Millionaires).
Non-Millionaires are more likely than their wealthier cohorts to take more into account the reputation of the companies where investments are made (81 percent vs. 76 percent of high net worth investors). They are also more likely to consider the past track record of investments (76 percent vs. 72 percent of Millionaires and 70 percent of high net worth investors).
The social responsibility, too, of an investment, is more of a consideration for non-Millionaires, who tend to be younger. Four-in-ten take social responsibility into consideration when making an investment, vs. 31 percent of Millionaires and just 19 percent of high net worth investors.
Why the comparative lack of interest in socially responsible investing among wealthier investors? Nearly eight-in-ten said that they consider their investment objectives to be purely financial. Conversely, non-Millionaires were the least likely to believe that corporations should do all they can to generate a profit and let individuals user their investment returns for providing social change (17 percent vs. 31 percent of Millionaires and 42 percent of high net worth investors).
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.