Investing is not just about numbers, charts, and graphs. New research has revealed that genetics and personality traits also play a significant role in investing. (View Research Here). Our personality traits, experiences, and background can all impact our investing outcome. By understanding your “Investor DNA” it can help you to make better investment decisions that are aligned with your goals and personality.

Risk is in the investor, not the investment.

Investors have their unique style and approach to investing, often referred to as Investor DNA. By understanding your ‘Investment DNA’, you can plan and sustain a consistent investment journey that is built around your goals, your tolerance level with risk, and your values. It is crucial to identify your potential investing strengths and weaknesses to create a strategy that plays to your strengths.

Several factors contribute to your Investor DNA, which we will explore below. It is essential to consider these factors and how they may have ingrained certain behaviours in your investing style.

By understanding yourself and your personality traits, you can create a better investment strategy that is aligned with your Philosophy. To be a successful investor, you need to think differently and go deeper down the rabbit hole. The Stoic Investors do not follow the crowd, and neither should you. By thinking outside the box and identifying your strengths and weaknesses, you can achieve better returns and avoid the pitfalls of average investing.

What are some areas that can shape your Investor DNA?

We must respect that everyone is different, every investor has a view of the markets, what value is, and different investment styles. If investors don’t pay attention to their make-up, they can get into investments they don’t understand, contributing to unnecessary stress, and pulling you further away from your financial goals. Think of how each of the below can play a role in how you perceive investing.

The year you were born.

The year you were born will contribute to how you view markets, risk and investing. For example, if you were born in a recession, a bad market, with doom and gloom news then that shapes how you see public markets, perhaps as risky and retirement destroyers. Visa Versa, if you were born and raised in boom times and all the headlines were about triumphant investors then that impacts your views, perhaps that public markets can make you a millionaire.

The Household you were raised in.

Whether you were raised in a low-income, middle-class, or wealthy household will shape how investors interact with public markets. A scarcity mindset from a low-income upbringing may make you conservative by nature, low-risk and value-focused. In a wealthy home with a lot of money being thrown around, this may give you the “go broke or go home” mindset, investing with a higher tolerance for risk or growth orientated.

The influences around you.

The influences early on in life can alter how we interact with markets. Think of the people you were exposed to such as your parents, family, school experiences and perhaps the first jobs you had and how they shaped certain beliefs and ideas. Was money talk normal at the dinner table or was it the “root of all evil”? Were you raised by a gambler or an accountant? These early experiences in life can play a bigger role than we think.  

The experiences you have gone through.

Experiences perhaps from your initial foray into investing. Did you start strong and make major wins which can cause you to ignore risk? Perhaps you took a loss early which humbles you to the reality that you can lose money if you are not cautious. Did you have a bad experience that turned you off the market completely? Both experiences growing up and at later stages in life will impact your decisions.

In Summary…

Investor DNA is more so about awareness of these factors and how they may be driving certain decisions. Aligning your values with your Philosophy and investment strategy will help you stay focused long-term. A lot of investors don’t place much emphasis on behaviour and areas such as “DNA” nor believe it contributes to successful investing outcomes. I do believe that it plays a much bigger role, especially if we want to do this over a lifetime.

It is with this in mind we investigate ALL the contributing factors that can help us improve as investors. With a short-term approach perhaps, these factors don’t contribute much to the result, however, with a decade-by-decade mindset they will certainly play a huge role in the outcome. Just like the difference between 1% compounded over 30+ years…the immediate minuscule difference does not weigh much but after 30 years you would have preferred the 1%!  

I always ask the question before investing, especially in new asset classes or sectors, is this suited to my personality? Is this aligned with my values? Will this cause me to be stressed? Can this help me achieve my long-term goals while protecting capital?

Awareness about these genetic factors can equip investors with the right approach to counter negative traits or reinforce positive traits.