Financial Knowledge and Personality Impact Stock Investment Performance

Two things you may not have known is that investor personality and knowledge determined investment outcomes. We often think of investors as shrewd and somewhat heartless but that may not be the case. Financial knowledge is likely to be helpful no matter if one has the personality of a bulldozer or of gazelle. However, when it comes to investment success it would appear ethical, polite, neurotic and social investors seem to do a little better. 

Financial Literacy Helps Investors

Financial literacy helps in investment selection and that is important for anyone getting into stock investment. There are assessment tools like the Investment Strategies Scale (ISS) that helps assess investment strategies used by investors. What the study doesn't say is whether either of those strategies leads to improved outcomes.  Investment Strategies Scale Study For this we have to look at personality and outcomes.

The Personality of Investors

We can further look at research on stock investing, personality and outcomes. To do this you may want to review a study on Investor Personality and Market Investing Outcomes. The most remarkable aspect is that positive traits seem to be associated with effective investors. 

1. 146 participants

2. Researchers looked at Big-five personality traits, social behaviors, self-attribution and demographic characteristics on trading outcomes.

3. Used machine learning for assessments to cluster socioeconomic determinants and financial decisions.

4. They found investors more open and neurotic gain higher returns compared to the market benchmark.

5. Social and ethical virtues (fairness and politeness) were associated with effectiveness of trading.

 

My Working Strategy Not Finished: I will keep adjusting and tweaking until I get something good. Seeking to create a funnel.  

1. Find a range of value to look at in terms of stock price. I'm looking at lower priced stocks that have room to grow. Low-Risk Anomaly 

2. Use current and future market trend projections to determine whether they fit in an upward swing. Look around for industry reports.

3. Understand how personality impacts my stock choices and take a minute to think about that before buying. I'm probably more mid term. Positive Outcomes from Investment Personality and Knowledge Studies

4. Diversify among multiple stocks in different industries versus a single type of stock to protect the whole portfolio. Investing in multiple industries.

5. Look for stocks that hedge each other. When stocks are declining in some arenas, they may grow in others. Watch how they counter each other and seek to mix a balance so as to benefit on total stock portfolio returns beyond individual stock performance. 

6. Seek out possible pairing of long and short selling and consider selling stocks consistently over average when compared to similar stocks. If a company appears well managed and run well then hang onto it. Pairing Strategy Bi-Objective Optimization

7. Buy and hold if in alignment with market trend. A few other weaker predictors include Fourth-Quarter Growth Rate in Personal Consumption Expenditures (gpce), Aggregate Accruals (accru), Credit Standards (crdstd), The Investment Capital Ratio (i/k), Treasury-bill Rates (tbl) 46 Stock Strategies. Thus if you want to delve more into the stats these may work.  

8. Undefined...still thinking about it. That is as far as I got. :) To be continued.....

Portfolio Observations:

-May 16th, 2024 I had a poor performing stock that was sitting in the abandoned account so I just sold it to clean it out so all stocks are newer as related to when I started formulating a strategy. My growth is 7.9%. That doesn't include the 3.4% current inflation rate. Its still a little under the average Average Stock Market Return 2024

-May 23, 2024 Most of the stocks are in a slump in the past few days but overall the portfolio is growing. The days gain was down but rests at about 4.91%

-My portfolio is down -1.2% but while most stocks were declining. At this snap show Nasdaq, S&P 500 and Dow were either slightly down or up. My portfolio seems to fall in line with the market. However, I did notice that Gold and Silver did rise indicating these are good hedges.  

*This is not stock advice at all. Go talk to your advisor. Its just an exploration of a topic.