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April 06, 2021

Bad investing -- it's in your DNA

By Jason Buckland, Sympatico / MSN Finance

Evidently, there is a science to investing.

I came across an intriguing article the other day from Jason Zweig, the Wall Street Journal’s personal finance zealot, a patient and admittedly conservative financier.

Zweig took to the University of Pittsburgh’s imaging genetics lab, subjecting himself to a chorus of saliva samples and brain scans to find just what role his DNA is playing in his market behaviour. What he uncovered was pretty interesting.

Doctors stuffed Zweig into an fMRI, or functional magnetic resonance imaging, machine, where he faced a simple guessing game to determine how his brain processed and reacted to risk/reward situations.

Zweig viewed a face-down playing card and was told to forecast whether it was higher or lower than a five. If he guessed right enough times, he would win ten bucks.

When his prediction turned out to be correct, he noted, the writer’s ventral striatum – a reward centre of the brain – responded twice as intensely as that of the average person.

Sounds pretty simple, no? But from this one isolated exercise, doctors were able to assess that Zweig’s DNA conditions him to “crave the immediate gratification of quick profit.” Based on data from similar participants, Zweig was said to be the type of investor to characteristically leap at the chance to make “$50 today rather than wait a year to get $100.”

Now, here’s where the intrigue hits. While the majority of our decision-making is derived from our upbringing, education, experience and situational context, it’s said that perhaps 20% of our risk assessment is genetically pre-determined. Zweig is a professional, seasoned investor (a bear market kind of guy, remember) who has learned to overcome what DNA suggests his brain should tell him about certain judgements he should make. But what about the rest of us?

If we aren’t entirely self-aware of our investment tendencies or experienced enough with money to recognize when right is actually right – not what we are biologically programmed to think is right – how can we truly know we will act appropriately with each decision we face?

Perhaps more importantly, what if we trust our finances with an advisor? This isn’t to say money planners are ignorant to the human element of investing, but if doctors imply one-fifth of decision-making is genetically pre-disposed to each individual, that’s bound to suggest a startling frequency of investment choices are at least questionable in their conception, right?

In the end, I guess, enough preparation and mindful thought should theoretically provide an antidote to this reasoning. It is, however, something to keep in mind when an investor offers advice on how to spend your money.

“Remember, no matter how evolved you are personally, we all have blind spots and biases,” writes the Financial DNA blog. “Very often clients ‘eat’ the behaviour of the advisor. So, the advisory becomes dangerous if the advisor is not aware of his or her blind spots.”



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...