Markets & Strategies

Introvert Vs. Extrovert: Investment Strategies to Match Your Personality Type

If you understand how your behaviors influence your investment decisions, you may be able to uncover new opportunities.

by Michelle Crouch - June 11, 2018

Research shows that your personality type has a strong influence on your investment style.

While the traits typically associated with introverts (cautious, analytical) can give them an advantage, both introverts and extroverts can be successful investors, says Mary Gresham, Ph.D., a financial psychologist in Atlanta. The key, she says, is being aware of the limitations and advantages that naturally result from the way you invest.

Extroverts, as investors: Typically, extroverts are more willing to take financial risks and seize opportunities that can be lucrative in the long run. They also tend to have higher incomes than introverts and they’re more likely to be CEOs. But sometimes, extroverts’ excitement about a new opportunity leads them to make impulsive or emotional financial decisions that hurt long-term returns.

Investing strategies for extroverts

  • Play the long game. Your brain seeks out stimulation and risk, so you love to find the next big thing, make an investment decision, and watch it pay off. When things go wrong, your inclination is to figure out a way to fix them — fast — whether it’s by dumping an investment or making a major change in your asset allocation. However, research shows that trading less frequently leads to stronger long-term returns. “Try to develop an interest in growing something over many years instead of focusing on what’s on the table right now,” says Laurie Helgoe, Ph.D., a psychologist and author of Introvert Power.
  • Do your homework. In your social interactions, you may hear about the latest hot stock or new investment products or services. No matter who the source is, don’t take claims at face value. Do your own research and always read the fine print before investing.
  • Build in safeguards. If you have a tendency to make emotional or impulsive investment choices (causing you to potentially sacrifice some of your returns), put some protections in place. Wait a certain amount of time before moving forward with a new investment. Or before you make a move, run it by someone whose opinion you respect, whether it’s a trusted friend or your financial advisor. “Take advantage of your advisor’s expertise,” Gresham says. “Their job is to ask good questions and make sure you’re on a path to long-term financial success.”

Introverts, as investors: Introverts tend to analyze and ponder each financial decision before they act. “Introvert brains are programmed to pull in a lot of information, reflect on it, and play out scenarios in their heads before they act,” explains Helgoe. “They rarely get distracted by immediate rewards.” However, because introverts are naturally more risk-averse, they may miss opportunities.

Investing strategies for introverts

  • Force yourself to take some risks. Your natural inclination toward caution protects you from making bad decisions, but it can also prevent you from trying something new or taking calculated risks that will grow your portfolio. If your portfolio leans conservative, ask your financial advisor to set aside some money in a separate pool. Then draw from that pool the next time your advisor recommends a new type of investment that looks a little risky, and see how it feels. “It’s a lot easier to take a calculated risk with a small subsection of money that you can actually afford to lose,” Gresham says. “Make sure your advisor knows that you need him or her to push you out of your comfort zone.”
  • Build a diversified portfolio. You can’t make money without taking some risks, and diversification helps protect you from long-term volatility because you’re not putting all your eggs in one basket. Your advisor can make recommendations based on your goals.
  • Don’t get bogged down in the details. You love analyzing data, charts, reports, and metrics before making a financial decision. But “introverts sometimes spend too much time in contemplation and miss an opportunity,” Helgoe says. For example, many introverts missed the opportunity to buy when stock prices were low at the end of the 2007 recession. Ask your advisor to alert you when you need to act quickly on a decision.

Asset allocation and diversification cannot eliminate the risk of fluctuating prices and uncertain returns nor can they guarantee profit or protect against loss in declining markets. All investing involves risk, including the possible loss of principal.

Michelle Crouch writes about consumer finance, parenting, and more from her home in Charlotte, North Carolina. Her work has appeared in Reader's Digest, Parents magazine, and The New York Times.

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