High Volatility and Portfolio Losses Weigh On High-Net-Worth Individuals

According to the World Wealth Report 2012 from Capgemini and RBC Wealth Management, last year was the second most volatile period in the last 15 years. While the number of people with over $1 million of investable assets increased by 0.8% worldwide, the number of ultra-high-net-worth individuals with $30 million decreased by 2.5%, losing 4.9% of their wealth.

The report points out that these higher-net-worth individuals suffered losses because they invested in riskier, less liquid securities, such as hedge funds and commercial real-estate. The same group now seeks capital preservation.

A new survey from Spectrem Group underscores that trend, finding that millionaires are becoming more pessimistic about a strong economic recovery. Specifically, Spectrum’s Affluent Investor Confidence Index plunged 7 points in May to a minus 5 rating, down from a rating of 2 in April and a 5 in March of 2012. Additionally, the firm’s Millionaire Investor Confidence Index fell 5 points to a 3 score, the largest one month decline in nearly a year.

George H. Walper, Jr., president of Spectrem Group, attributes the pessimism to the ongoing European debt crisis. And that may be. However, it is also likely that the pessimism has surfaced due to a frustration with their previously high risk investment portfolios. Especially in times of extreme market volatility, a diversified portfolio gives you the best chance of staying invested in the market to meet your goals.

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