In a 20-page guide, The Seven Deadly Sins of Multi-Asset Investing, advisers were given a brief snapshot on various investment pitfalls and how to help their clients resist falling into them.
The guide said: “Investing is an activity that’s rife with opportunity to fall into bad habits, be led astray, or make decisions for the wrong reasons.”
Therefore, advising clients about “being aware of the behavioural traps and temptations that lie in wait for the unwary investor is the first step to avoiding them”.
The sin of lust was equated to being attracted to short-term investment opportunities. The guide proposes that investors instead avoid ‘instant gratification’ in favour of investing for the long term.
Gluttony was represented by the temptation to “gorge on” information, rather than having the discipline to screen out “market noise”. The guide proposed that the basis for selecting bonds and equities should be “sound and lean” for “rich pickings”.
The guide said greed should be avoided by steering clear of the behaviour of the herd, instead proposing sticking to the discipline of a balanced portfolio.
Commenting on sloth, the guide warned financial advisers not to be lazy when it came to due diligence, but to rest comfortably when the sound, long-term decision about investment had been made.
“The wrath and unpredictability of the markets can be daunting,” the guide said, so it proposed that diversification should be considered as the “key to calm, even when volatility abounds.”
Adviser view
Alan Dick of Glasgow-based Forty Two Wealth Management said: “I agree with most of these, including the ‘sin’ of believing that you know more than you do. The idea that we can guess in advance is an example of overconfidence.”
