How do genes and the brain affect investments?

What makes you feel happy?

Perhaps it's food, chatting with friends, traveling...

The happiness you feel is attributed to a neurotransmitter called dopamine, which is related to genes and the brain.

In this video, we will discuss how genes and the brain influence investments.

First, let's take a look at a gene called DRD4.

It may vary into alleles, with different alleles having different numbers of repetitions in the gene segment.

This gene can affect dopamine receptors, and the higher the repetition of alleles, the lower the sensitivity to dopamine.

Therefore, individuals with a high repetition of alleles need more stimulation to feel the same level of happiness.

What does this have to do with investing?

A study published in the journal "Risk and Uncertainty" compared people with DRD4 7 repeat allele genes to those with 4 repeat allele genes.

The study found that participants with high repeat allele genes are more likely to take risks when facing potential losses.

Their financial plans are usually more impulsive, risky, and short-sighted.

For example, they may not think about setting up overdraft protection for bank accounts and may find it difficult to pay off credit card bills every month.

So, if your partner is not very reliable in financial matters, it may be due to their genes.

Moreover, how much influence do genes have on investment behavior?

A study analyzed data from 37,504 pairs of twins from the Swedish Twin Registry and their financial investment portfolios at the Swedish Tax Agency.

Research has found that genetic factors can explain about a third of the differences in stock market participation and asset allocation.

However, this does not mean that other factors are not important, such as the environment, personal experiences, or brain function.

Now let's shift our focus to the brain, starting with dopamine.

Dopamine is related to the reward system in our brain, just like the engine of an automobile.

When an opportunity arises, the reward system is activated and releases dopamine, driving us to pursue and obtain rewards.

Imagine you are in a bull market, surrounded by messages about making money.

This may tempt you to become greedy, only seeing opportunities and ignoring risks.

As a result, you may buy assets at high levels and take on greater risks.

There is another situation.

Assuming a financial crisis occurs, the entire market is full of uncertainty.

Feeling angry, anxious, and afraid is very normal. But you may make rash decisions under emotional influence, which is actually not conducive to long-term investment.

This situation is related to another system in our brain, which we can call the loss aversion system, similar to the brakes of an automobile.

When faced with threatening stimuli, the system is activated and uses various neurotransmitters to trigger negative emotions, prompting you to avoid.

People with lower levels of serotonin are more likely to feel depressed and activate this system.

The two systems mentioned earlier are associated with a primitive area in your brain, primarily the amygdala.

This area controls your emotions and when facing significant opportunities or threats, it prompts you to fight or flee.

However, our brain also has an area called the prefrontal cortex, which operates like the control system of an automobile.

This area is responsible for regulating emotions and making rational decisions. In times of financial crisis, it may temporarily fail.

How can it be reactivated?

You can train your brain to focus more on long-term results,

which will make your financial goals, financial plans, and trading systems clearer, and then stick to them.

By doing so, you may find a balance point, reducing the impact of random events and emotions.

When you are in intense negative emotions, you can increase dopamine levels through adequate sleep and exercise.

You can also sunbathe more, eat foods rich in amino acids such as bananas and milk to replenish your serotonin, which may help reduce the probability of activating the loss avoidance system.

By now, I believe everyone has gained a certain understanding of how genes and the brain influence investments.

What are your thoughts on this episode?

Mooers are welcome to exchange and share in the comments section~