Can Your Personality Influence Your Portfolio? New Research Points to “Yes”

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing the findings of two recent academic studies that may offer insight into how investors can make more fruitful financial decisions:

Academic researchers have been exploring how investors’ personalities might affect their financial decisions and wealth outcomes.

In one study, three finance professors (Dr. Zhengyang Jiang from Northwestern University’s Kellogg School of Management, Cameron Peng from the London School of Economics, and Hongjun Yan from DePaul University’s Driehaus College of Business) surveyed more than 3,000 members of the American Association of Individual Investors — a relatively sophisticated group of market participants.

These researchers examined correlations between five personality traits and the investors’ market expectations and portfolio allocations.

Another study (by Mark Fenton-O’Creevy from The Open University Business School and Adrian Furnham from the BI Norwegian School of Management) involved more than 3,000 U.K. participants.

These authors looked for correlations between the same five personality traits and three measures of wealth: property, savings and investments, and physical items.

Here’s a look at how these studies were conducted and some of their key findings, which may offer insight into how you can make more fruitful financial decisions —

The Big Five

Both studies were designed around the “Big Five” model of personality, which has long been used by psychologists to measure people’s personalities and identify their dominant tendencies, based on five broad traits. These traits are openness to experience (curious and creative), conscientiousness (organized and responsible), extraversion (sociable and action-oriented), agreeableness (cooperative and empathetic), and neuroticism (emotionally unstable and worry-prone).

Each participant was rated on a spectrum for each trait according to how they answered survey questions, the results of which typically capture how individuals…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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