How does personality affect investment?

What is your personality?

Are you tense or relaxed? Extroverted or introverted? Cooperative or hostile? Careful or careless? Open-minded or conservative?

Take a few seconds to think. Feel free to pause the video if necessary.

Why should we think about these questions regarding personality?

As Buffett said, the most important quality for investors is personality, not intelligence.

Everyone has their own personality. However, the complexity of human nature makes it hard for us to see ourselves clearly.

Sometimes you feel like you need to work hard to achieve success, but in reality, you just want a comfortable life.

Sometimes you think you want to be an adventurer, but in reality, you don't like sailing.

When it comes to investment, some people think they are long-term investors, but when the stock price fluctuates, they realize that they are not actually.

When an investor's investment behavior is inconsistent with their personality, it is difficult to achieve satisfying results through effort alone.

This inconsistency is often an obstacle we create ourselves, perhaps the biggest source of pain in investment.

To eliminate this inconsistency, we can make investment decisions based on our personality.

Next, let's discuss these two questions. What is personality? What is the relationship between personality and investment?

Personality refers to the relatively stable and predictable traits a person possesses. These traits are not easily changed by external factors.

According to the Big Five personality theory, personality traits are mainly determined by five factors. They are:

Neuroticism, Extraversion, Agreeableness, Conscientiousness, Openness to Experience.

First, let's talk about neuroticism.

Neurotic individuals tend to have unstable emotions, easily feel depressed, anxious, and angry, and have difficulty controlling their emotions under stress.

Highly neurotic investors tend to be more risk-taking, have a higher tolerance for risk, but they often make investment decisions impulsively.

In contrast, low neurotic investors have relatively stable emotions, but may sometimes be careless and too relaxed.

Try to observe yourself, when the market is falling, do you feel anxious, or even have difficulty falling asleep?

Second, extraversion.

Extroverted individuals are usually good at socializing, enthusiastic, and talkative.

Because they need to make decisions under a large amount of external stimuli, they tend to take on more risks and are more prone to significant losses.

Introverted individuals tend to make decisions based on their own experiences and inner motivations, but sometimes may miss important news.

Before making an investment, do you discuss with others or do your own research?

Third, flexibility.

Flexible individuals are more likely to trust others, have empathy and a spirit of cooperation, but may also be reluctant to express dissent when they see dangerous investment signals.

Individuals who are less flexible are more easily angered and hostile, often finding it difficult to get help from others.

When you have different opinions from others, do you actively express your own views?

Fourth, responsibility.

Responsible individuals are usually more meticulous, hardworking, and strict.

They tend to focus more on long-term goals and rules, tend to avoid risks, but sometimes are not as flexible, and may miss out on profit opportunities.

Recall, have you ever created a plan to address all potential emergencies before investing?

Lastly, it's about openness.

People with high openness usually have imagination and curiosity, making them more likely to seek new experiences in investments.

To better understand your own personality, you can complete relevant tests, such as the Big Five personality test, while also spending more time observing yourself.

This way, you can develop specific interventions based on your personality traits to fully leverage your strengths while avoiding the impact of weaknesses.

Here are some suggestions for your reference:

For neurotic investors, relaxation training can help reduce impulsive investments.

For extroverted individuals, it is best to have a prepared response plan before any unexpected situations arise in the market.

For diligent but inflexible individuals, it may be necessary to reduce the frequency of short-term trades.

The video ends here. Welcome everyone to exchange and share in the comments section~