- Bargaineering - http://www.bargaineering.com/articles -

Are your genes influencing your investing decisions?

We hear a lot about money personalities [3], and how they influence our financial decisions. But why do you have the money personality that shows through in your life? What’s behind it? The answer might be in your genes.

When it comes to the decisions you make with regard to financial risk, research shows that your genetic makeup can be a big influence.

Your genes and investing decisions

There are few financial areas that display your aversion to risk, and the decisions you make with that regard, than investing. In order to try to find out what makes people take big risks with their money, researchers at Stanford, Northwestern, and Vanderbilt asked study participants how they would invest $10,000. Then they compared the results to the participants’ genetic makeup.

According to the paper, which was published in the journal PLoS ONE [4], financial decisions are linked to the serotonin gene 5-HTTLPR. Each person has two alleles (copies) of this gene. It’s the combination of these gene copies that influences the way you make financial decisions, including how you assess the risk associated with investing, and your fear of loss [5].

Alleles are either short or long. In the case of the 5-HTTLPR gene, researchers found that study participants with two short alleles were more likely than those with two long alleles to put more of their $10,000 investment money in cash. Those with two long alleles were more likely to invest their money in stocks.

Researchers involved with the study accounted for financial literacy, income level, and cognition. They found that these factors didn’t adequately explain the differences in investment strategy in the participants. The deciding factor had to do with the participants’ genetic makeups. Those with shorter 5-HTTLPR alleles wanted to avoid risk to a higher degree, and that type of behavior is likely to carry over into financial decisions beyond investing, the researchers found.

Are you a slave to your genes?

If genetics determines your financial decision-making process, does that mean that there’s nothing you can do?

Of course not!

Rather than assuming that you have to behave in a particular way, just because it’s hard-wired into your genetic code, recognize the influence that your propensities have on you. When you understand the reasons behind your too-high risk aversion (or your desire to take on too much risk), you can actively work to combat your impulses if they’re threatening your financial future.

So, which way do you think your genes point you? Are you a risk-taker, or risk averse?

(Photo: RambergMediaImages)