Investor Neuroimaging – The Pawleys Perception-Thinking Matrix

Wouldn’t it be cool to see a scan of your brain each time you made an important financial decision? You could learn what areas of your brain light up, and use the feedback to make better decisions in the future. Well, since hauling around a neuroimaging machine would be impractical, it is more reasonable to explore some of the personality traits that influence investment decisions. I’ve written on the topic of emotion and investing, so let’s take it to the next level. There are 2 key pockets of behavior that play a role in how investors make decisions. Personality traits are not inherently good or bad, and I am not advocating judgement or criticism, or even that people should change the way they are wired. But by gaining a better understanding of yourself, you will see that in a random and inconsistent world, your responses and behavior are actually quite consistent. This is why you may look at the actions of someone else as completely ridiculous, while to them it seems quite natural. As a blind skier guide, I learned the different ways that adults learn – thinker, feeler, seer, doer. Understanding these learning-style differences helped me become a more effective instructor. I also learned how to vary my approach and style in managing employees using the different Myers-Briggs personality types – introversion/extroversion, sensing/intuition, thinking/feeling, judging/perceiving. Simple generally trumps complexity, so I’ve organized the investor traits that into two key areas:

Perception: Those driven by perception follow feeling and intuition. The Perceiver likes to interpret surroundings and add meaning to things, and often stays open and thus not completely committed to ideas.

Thinking: Those driven by thinking utilize logic and concrete experiences from the past. The Thinker needs data and consistency and may have trouble dealing with ambiguity.

Both profiles can be outgoing or more reserved, and may have varying levels of awareness of themselves and the world. These personality factors help us understand why we feel more comfortable in certain circumstances, and great discomfort in others. These factors also give insight into how people react and behave, because we all strive to get back to our most comfortable way of living in the world. Adrenaline junkies just don’t feel right unless they are chasing their next adventure, while introverted philosophical types prefer solitude and quiet. Most of us fall somewhere in between.

Investors and react to various economic and market environments in different ways, and there are strengths and draw-backs to both types.  Enjoy, and hopefully this will help you become a more self-aware investor and improve your performance!

Pawleys Investor Perception-Thinking Matrix

© 2013 Pawleys Investment Advisors, LLC. All rights reserved.

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