November 27, 2004 07:01 AM
Study Links Personality Type to Investing
Excerpt: By analyzing data collected in the phone survey, Merrill Lynch and market research firm Mathew Greenwald & Associates identified four distinct investing personalities: measured, reluctant, competitive and unprepared. While 14 percent of those surveyed didn't clearly match any profile, most investors fall into one of these categories.
We've all got our own quirks when it comes to dealing with money, but a recent study suggests your personality has a great deal to do with how you handle your finances — and the type and frequency of investing mistakes you make.
In a nationwide survey, Merrill Lynch Investment Managers found that for most people, the biggest and most painful mistake when it comes to investing was waiting too long to start. The second most commonly cited error was holding on to losing investments. Others included not setting aside enough money for investing and not cashing in on winners.
Interestingly, financial advisers surveyed by Merrill had a different perspective on client mistakes, reporting that a failure to observe basic investing fundamentals, such as asset allocation or regular rebalancing, was the most common error. For the investors who participated in the telephone survey, which focused on those with annual incomes and investable assets of at least $75,000, such big-picture factors were far down the list. Yet it's these kinds of "systemic failures" that do the most damage to portfolios over the long run, said Robert Doll, chief investment officer of Merrill Lynch Investment Managers.
"At the end of the day, they tend to be one and same," Doll said. "An individual doesn't look at 'I held onto my losing stock or fund too long' as 'I didn't rebalance.' But when you think about it, they're kind of one and the same mistake. They're manifestations of the same problem: the absence of discipline."
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