Long-term horizons, current income and diversification drive investment decisions

High net worth individuals invest for three purposes.

High net worth individuals invest for three main purposes. Long-term capital appreciation is the most important, current income ranks second, and gaining a level of diversification comes in third. This at least was the findings of our extensive 2014 Global Family Business Survey.However, many HNWIs also seek to match their investment choices with their expertise and experience in running companies – entrepreneurship and a passion for business are also important drivers for HNWI investments.

Stephan Schmidheiny Professor of Entrepreneurship and Finance

KPMG Switzerland

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High net worth individuals invest for three main purposes. Long-term capital appreciation is the most important, current income ranks second, and gaining a level of diversification comes in third. This at least was the findings of our extensive 2014 Global Family Business Survey. 

However, many high net worth individuals (HNWIs) also seek to match their investment choices with their expertise and experience in running companies – entrepreneurship and a passion for business are also important drivers for HNWI investments. 

Risk appetite

The desire for long-term capital appreciation is reflected in HNWIs’ appetite for risk. The majority (60%) of HNWIs canvassed said that they take a balanced approach to risk for investments outside of their main business, searching for reasonable risk with reasonable returns. As one German entrepreneur says: “Wealth management for me is a focus on maintenance rather than rapid growth and mostly I prefer slow and steady gains to risky investment opportunities.” 

Nevertheless, there are HNWIs at both ends of the risk spectrum. One-fifth of HNWIs are prepared to assume high risk investment strategies in a bid to generate high returns. A further fifth are risk averse and will settle for low returns in exchange for low risk. A mere 3% indicated that they are only likely to invest when capital will be fully preserved. 

This is good news for family businesses, as there are clearly investors across the spectrum of risk appetites. 

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