Personality traits predict how investors monitor portfolios


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Although there are countless investment concepts, books, and data out there, the truth is that no one can predict what will actually happen in the market. This is why investing involves a lot of uncertainty and risk.

There is, however, information that individuals can glean from themselves to provide insight into how they manage their investments.

Dan Egan, vice president of behavioral finance and investing at Betterment, suggests that there are two general personality traits, neuroticism and emotional intelligence, that have been linked to specific investing behaviors.

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How Neuroticism and Emotional Intelligence Play a Role in Your Investments

According to Egan’s own research, people who rate themselves as neuroticism generally watch their portfolios more closely and are more sensitive to market performance than those who rate themselves as neuroticism.

“That means they connected more in general, and more in response to big moves up or down in the market,” he explains.

Regarding emotional intelligence, Egan cites data indicating that people with higher emotional intelligence tend to invest in lower-cost funds, use tax-advantaged accounts, and trade less in response to market declines. (and simply less bargain in general).

In addition to personality traits, certain demographics and characteristics also play a role in investment management. According to Betterment’s customer login rates, the patterns listed below are several Egan shares that, on average, correlate with the greater likelihood of an individual monitoring their account more frequently:

  • Being a man (8% more)
  • Be younger (3% more for those 30 and under)
  • Have less seniority with Betterment (4% per year)
  • Have a lower net worth
  • Have a higher balance
  • Using the Betterment Mobile App

Overall, however, the frequency with which people check their portfolios varies. “Some people log in daily, but most people log in between once a month and once a week,” says Egan. “A person will typically monitor their taxable brokerage trading account much more frequently than their retirement accounts.”

Use your personality type to your advantage

There is no “good” or “bad” personality type when it comes to investing. On the contrary, it is more important to be aware of your behaviors in order to better prepare yourself for success.

Egan gives the following example for a weakly neurotic person: although they are less sensitive to market movements, they may not be monitoring their portfolio enough to seize opportunities to rebalance (adjust your investments) or reap losses. tax (only pay taxes on your net profit). In this case, it might be better for them to use an automated investment service that monitors their portfolio for them. Robo-advisors are software platforms that use algorithms to create your investment portfolio, aiming to maximize your potential return based on your risk tolerance and risk capacity.

The best robo-advisors offer low-cost diversification and will automatically rebalance your portfolio regularly. Betterment does all of this and offers all users a few automated tax tools, including Tax Loss Harvesting, where the robo-advisor will automatically sell assets incurring a loss to help offset taxes. Wealthfront is another that offers a tax loss harvest that can help offset advisory fees. And, for clients with invested assets of $50,000 or more, when an investment declines in value, Charles Schwab’s automatic tax loss collection will help offset taxes on investment gains.

While the above would be a good suggestion for a low-neurotic person, Egan suggests that a high-neurotic person who is more sensitive to market movements might instead want to use an intermediary to reduce the stress and anxiety associated with concerns about the steps. Getting advice from a financial planner in this case can help put you at ease.

“The more you can approach investing in a way that manages and takes into account who you are and how you tend to behave, the better long-term decisions you’ll make,” adds Egan.


On Betterment’s secure site

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, minimum balance of 0 USD; Premium investment requires a minimum balance of $100,000

  • Costs

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has an annual fee of 0.40%

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    Up to one year of free management service with qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

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    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

wealth front

On the Wealthfront secure site

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    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

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    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront’s annual management advisory fee is 0.25% of your account balance

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    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

  • Educational resources

    Offers free financial planning for planning college, retirement and buying a home

Charles Schwab

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing via Schwab One® Brokerage account. Automated investing with Schwab smart portfolios® requires a minimum deposit of $5,000

  • Costs

    Fees may vary depending on the investment vehicle selected. Schwab a® The brokerage account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for 4,000+ mutual funds, and $0.65 fees by option contract

  • Premium

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    Robo-advisor: Schwab Smart Wallets® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Legacy and Custodial IRAs; plus, a Personal Choice Retirement Account® (ECRP) Brokerage and negotiation: Schwab a® Brokerage account, brokerage account + specialized platforms and support for trading, Schwab Global Account™ and Schwab Organization Account

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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff alone and have not been reviewed, endorsed or otherwise endorsed by any third party.


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