Why Introverts Can Make Great Investors
People tend to think that when it comes to personality types and success, extroverts have a leg up. But do they? When it comes to investing, traits typically associated with introverts can give them an advantage.
Some believe the hard-wiring of biology affects human behavior and thus influence how people approach investing. Extroverts often enjoy thrill-seeking activities that stimulate the neurotransmitter dopamine whereas introverts savor the calming and happy effects of the neurotransmitter serotonin. For making investing decisions, though, being calm and collected is often better than being emotional.
Let’s take a quick look at some of the differences between introverts and extroverts and how that can impact how we invest.
Introverts tend to get drained of energy when they are with people and recharge from having alone time. They aren’t big conversationalists since they prefer to listen and avoid small talk. Introverts also like to ponder over decisions and are generally pretty organized. Research and deliberation over financial decisions are also important to introverts.
Extroverts on the other hand feel energized when they are surrounded by other people and enjoy engaging in conversations. They tend to verbalize their thoughts and crave stimulation and rewards. Extroverts also are more focused on the bigger picture whereas introverts hone in on smaller details. The decision to take investing risks is more common with extroverts.
Successful and wealthy introverts
So how do all of these traits affect wealth, talent and how we invest? An impressive 75 percent of the highly gifted population are introverts according to research conducted by Susan Cain, author of Quiet: The Power of Introverts In A World That Can’t Stop Talking.
One of the world’s most famous investors, Warren Buffett, whose worth is close to $66 billion is also known for being an introvert. Cain describes Buffett as “a classic example of an introvert taking careful, well-calibrated risks.” Other famous investors and entrepreneurs include Bill Gates, Larry Page, Steve Wozniak, Charles Schwab and Mark Zuckerberg.
Introvert traits that may be helpful to investing
Taking time to understand investments. Introverts are generally not impulsive traders unlike some extroverts. Instead of rushing into investment decisions, introverts like to spend a good deal of time researching companies, looking at comparable metrics and developing a solid understanding of what it is they are choosing to invest in.
Successful investors know how important it is to familiarize oneself with the pros and cons of any investment and understand the risks involved before diving in. Most introverts want to feel comfortable they are making a smart decision before handing over their money.
Manage uncertainty without acting on impulse. Since most introverts are less focused on external rewards than extroverts, they are patient investors. This makes many introverts natural long-term investors. Introverts also tend to avoid costly self-destructive impulses. They are persistent and thorough. Extroverts, on the other hand, may experience lower performance in comparison due to abrupt emotional based trading or trading at high frequencies.
Laurie Helgoe, clinical psychologist and author of “Introvert Power” believes, “extroverts are often drawn to investing because of the thrill of it. They can get caught up in the anxiety of missing out, and if they operate out of that anxiety, they are likely to close down thinking and lose perspective.”
Since most introverts are not interested in taking on unnecessary risk, they are more prone to rely on solid research and facts when making investment decisions. Warren Buffett is a prime example of an introverted investor who performs thorough due diligence before trading and patiently holds positions for many years.
Perk up them ears. Introverts are often great listeners. Although listening may not seem highly relevant to investing, this innate ability can come in handy. Great opportunities can be discovered through observations and strong listening skills.
For example, introverts who are in the market to purchase property can learn a lot simply by listening and observing other prospective buyers and agents at an open house. Instead of rushing from room to room, they soak in every detail and gauge other people’s likes and dislikes in addition to their own to determine if a property is fairly priced.
Which investing skills can introverts learn from extroverts?
Examples of traits shared by many extroverts that can be conducive to investing:
Seize opportunities. Although introverts like to spend time on detailed research, they can miss out on profitable opportunities by either taking too long to act or not acting at all. Extroverts are more likely to jump on an opportunity when they see one.
Take risks. Introverts are often calculated about any risks they take. While this can help them avoid losses, it can also result in lower returns. Sometimes introverts lack enough self-confidence to try something new when they prefer to err on the side of caution. Extroverts are more inclined to experiment and take larger risks that can lead to bigger rewards.
Negotiate. A common strength among extroverts is their ability to negotiate. Since extroverts are not afraid of haggling, they can benefit financially when they make purchases and sales. Introverts typically try to avoid negotiating because it can bring conflict. However, introverts who are open to getting out of their comfort zone can also learn to negotiate effectively through preparation and practice.
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