Behavioral finance is an extremely interesting field to me. I know that in theory we are all suppose to be “rational agents” making rational decisions. The reality is that a lot of investors do not make such decisions, at least not as often as we would like to think. What if we found out we are strongly oriented to the intuitive side of decision-making? Would this make us poor investors?
I’ve always believed that I was more of an analytical thinker, but my analytical side may have boundaries that I had not given adequate consideration to. Recently I found that despite my tendency to believe I’m an analytical thinker, it turns out that I have a strong intuitive side as well. Now I’ve always known that I am a more intuitive thinker in my personal life. I have a high EQ (emotional intelligence) and this comes through in my interaction with others. I’m even aware that crunching numbers is not a strength of mine. That is why you don’t see many stock analysis posts or excel sheets showing the breakdown of various mathematical data. Improving this weakness in analytical thinking is a constant goal of mine, but knowing that I’m more intuitive in my thinking leads me to question what impact does it have on my investment decision-making process?
A small post at Psychology Today prompted this inquiry into intuitive vs. analytical thinking and the test that you can find here allows you to determine what your preference between the two thinking patterns is. Even though I thought I was being analytical it turns out I’m very intuitive. I answered all three questions as an intuitive thinker would.
If you have a chance, take the test yourself and read all four of the post in the series. None are very long and you may enjoy the findings from what analytical vs. intuitive financial planners tend to do when it comes to making investment decisions. In the other scenarios I found that I answer in the intuitive thinking domain as well. What interest me most in all this is what do I do with this new-found revelation regarding my thinking style?
Honestly I don’t think it changes much. I’m not going to hang up my hat as an investor and give in because my intuitive nature leaves me at a disadvantage to those analytical thinkers and their fancy spreadsheets and graphs :-). No, I will continue to do what I’ve been doing: utilize my strengths and improve my weaknesses. Regardless of whether you are an analytical or intuitive thinker it’s important to remember that this little sliver of information is but a piece of the entire puzzle that is the process of our thinking. Each of us brings a unique mixture of knowledge, thinking style, and experience to the table and gives us a unique take on the world. This is what I love about the blogging world as I find it in the PF and investing universe: there is a place at the table for my intuitive brain as well as your analytical one and when it all comes together we are both richer from the exchange.
If you took the test yourself did you find out anything interesting? Were you surprised by the findings? How does your thinking style impact your approach to investing? Share your thoughts in the comment section.