It is tempting to think that the very rich possess some extra skill, one that would let all of us amass great wealth if we could just get our hands on it.
A new study by SigFig, an online portfolio manager, makes that idea even more tantalizing. SigFig examined a sample of 330,000 investors with total assets of nearly $147 billion and found that the wealthiest 25 percent were investing very differently from the quartile with the least wealth.
In fact, the wealthiest 25 percent of the investors SigFig surveyed were much more likely to follow practices typically recommended by financial advisors: they focused more on low fees, abstained more often from panic selling, and appeared to trade less often. The wealthiest investors also saw significantly better investment returns.
"Turnover has been shown time and again to impact returns, because you try to time the market and you can't do that. Trying to sell when there's a downturn — that's a sign of emotional investing rather than having a plan," said Tomas Pueyo, SigFig's vice president of product and growth, adding that the wealthy investors were steering clear of those practices.
An earlier study, by the CFP Board, also found that people with a comprehensive financial plan tended to be the most affluent population segment, with 46 percent reporting household income of at least $100,000.
SigFig, in its report, steered clear of attributing the wealthiest quartile's investment success to a set of behaviors. "We cannot prove a causation, but the correlation is there," Pueyo said. "Thinking it through, it's pretty clear that they are linked."