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.
9 thoughts on “Are You an Intuitive or Analytical Thinker?”
My gut reaction to two questions was the intuitive answer, but I ended up going with an analytical answer for all three. I think pure analytical people can make investing too much about numbers – and can trust their numbers far too much to be rational. Intuitive folk can fall prey to a similar trap – trusting their instincts too heavily and ignoring the numbers. Being aware of the type of thinker you are can help you avoid such myopia.
Headed Home…. This is how I think of it as well. Perhaps it is my naivety or lack of experience as an investor, but I find myself feeling that sometimes the numbers do not tell the whole story. They certainly tell a part of the story, but there is something left out. I’m really interested in how one could utilize both the analytical and intuitive means of our thinking to come to a better understanding of what it means to invest. But, maybe I think too much…
I’m confused. Aren’t the “intuitive” answers actually “wrong” answers?
Executioner, Thanks for stopping by. Yes, there is a right answer. I think what is meant to be discovered by the test is how you would naturally approach the problem. You also have to answer quickly. Taking time to work the problem would give you an inaccurate answer to your “style”. I would say that most people who are left brained would come to the problem analytically and those who are right brained would approach it intuitively. Now, my question is which preference is better in investing and why?
Agreed, see my comment below 🙂 ? In that series of three questions, none are answered correctly by the “intuitive” thinker.
By that definition from the three questions in that article, intuitive thinking is just not-thinking, because all the answers they come up with are wrong…
I must say that I saw one of these three questions before, so I knew they were some sort of “trick”-questions, so I knew to really think about them…
If you had been warned beforehand, that there was actually a right answer but that it required some thinking, would you have stayed an “intuitive thinker” or would you have read the questions better, thought harder, and come up with the only right answers?
Now if you use that thought in investing, will you stay an intuitive investor or will you become one who thinks before he acts?
Thanks for the comment. I think to really get the most from what the brief article was about you have to remember that it wasn’t about finding the right answer. By answering quickly you were forced to not, “read the question better, think harder, and come up with only the right answer”. It was a way of giving you insight into how you would naturally approach a problem. Having that insight gives you awareness of what bias you may come to an investment idea with even if it is a bias you are not fully awere of.
Maybe the lesson for me was: you too, can be fooled. Take your time and be careful. That’s a good lesson 🙂
In the risk aversion part I thought it was interesting that I knew I stood to gain a premium from taking the coin flip, yet I still took the sure money. Risk aversion at its finest!
In investing I believe numbers are important, but even if numbers look good other things have to be considered. I will not buy a stock simply because it has the best stats when I do a screen… It would be interesting to test it though.