Why the idea of a secret investment door can be an expensive myth

There are many areas in life where a high level of wealth gets you through a secret door. Here, a new realm of possibility opens up to you with better options than you faced before. Think luxury travel packages, chartered planes, private security, home chefs, and private schools.

If you’ve grown used to your path being eased in these ways, it’s perfectly understandable for you to then think that your high net worth should enable you to access a similar door, providing you with an expansion of options in investment products.

After all, with the basics in place and more money to invest, doesn’t investing in something complex that can provide you with more diversification make sense?

Read on to discover why this perception of a complex investment solution, just waiting to earn you a fortune, may well hinder you rather than help you, and not be as financially advantageous as you may well have thought.

The dangerous illusion of sophistication

Investment marketing departments spend hours of time and millions of pounds dreaming up new ways to package the financial building blocks into products their salesforce can confidently sell.

Their intention is to create a proposition so compelling that you’ll be happy to tell the story of what you’ve acquired at a party. After all, it’s human nature to want to tell a story to impress other people.

As is often the case, the opportunity will be presented as a limited offer available only as a high net worth solution, and there will be a price to pay to go through this exclusive secret door.

Unfortunately, in most cases, the reality is that the truth does not live up to the promise when it comes to that particular story you’ll have to tell.

Indeed, in my experience of speaking to people who have bought them, the returns these products provide are usually lower than a simple diversified portfolio.

Furthermore, they are often more expensive, which means higher charges are deducted from the value of your investment each year.

From a detailed investment point of view, the special offer may work for a while, but eventually, the chickens will come home to roost.

The benefits of status, a story to tell, and the feeling of sophistication, must be contrasted with the cost of higher fees, lower returns, less liquidity, and an unnecessary hassle factor.

The contrasting beauty of investment simplicity

Many investors are attracted to sophisticated opportunities because they have forgotten what a miracle it is that we can invest in the global financial markets at all.

Compared to previous generations, we are spoilt for choice. Because of that, to my mind, modern investors have lost their sense of wonder for the ability to own the best companies in the world at near-zero fees.

You should never forget that you aren’t buying an investment proposition to impress your friends or to have something to boast about at the aforementioned party.

The only purpose of your investments is to provide you, and your loved ones, with the life you want to live.

Because of that, I would strongly recommend that, when it comes to your investment strategy, you look to reframe the story you may be telling yourself about how your money is invested.

If you really do want to wow your friends and work colleagues, you should consider the innovation that has gone into you being able to become a diversified shareholder of the best companies in the world at the click of a button, at a low fee, with very few liquidity constraints.

If this structure were invented tomorrow and only marketed to the wealthy, it would instantly become the only game in town.

Instead, it’s readily available and, in my opinion, is very much the height of sophistication – without the expensive price tag other investment offers can carry.

By framing in terms of simplicity beating complexity, I think the traditional fund structure becomes the only sensible destination for you when new money is available for investment.

The importance of avoiding temptation

The temptation to participate in an exciting new opportunity is understandable. However, I would strongly encourage you, if you have already overcome the initial hurdle of growing your wealth, to stay focused on what got you there.

In the investment world, you can’t have too much of a good thing, and from experience, I know that simplicity is the ultimate sophistication.

Your overarching investment aim should be to seek a life well-lived, and investment products are nothing more than the means to that end.

My aim is to help you achieve this goal as simply and efficiently as possible.

Get in touch

If you’d like to talk through your own investment strategy, then please get in touch.

You can call me on 07769 156 250.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Equity investments do not afford the same capital security as deposit accounts.

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.