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What kind of investor are you?
The Internet is a morass of "risk-tolerance quizzes" that ask questions like:
But these quizzes are circular: If you knew for certain what you would do when the market crashes, if you had a clear sense of how much you value safety, if you were positive how long you can wait until you need your money or if you knew the limits of your own knowledge, then you wouldn't need to sit around filling out a questionnaire, would you?
What's more, a vast body of research shows that people aren't very good at predicting their future emotions, their future needs or their tolerance for financial risk.
Finally, humans are notoriously overconfident, exaggerating how much we know about just about everything, including investing. So even if you believed you knew how to answer questionnaires like these, your answers might very likely turn out to be wrong.
There's a simpler and better way. In the first edition of his classic book "The Intelligent Investor" (1949), Benjamin Graham, the great investor who was Warren Buffett's mentor, defined what makes an investor intelligent. The kind of intelligence Graham had in mind wasn't a function of IQ or graduate degrees; it "is a trait more of the character than of the brain."
Graham went on to explain that investing intelligence consists of:
At MarketPsych.com, you can take an "Investor Personality Test" that takes 15 or 20 minutes to fill out and, based on my results, at least, seems to give a fairly accurate picture of what makes you tick. The test skips all the nonsense about what you think you would do if the Dow crashed or how much you believe you know about the markets. Instead, it measures five dimensions of personality: agreeableness, extraversion, openness, emotional sensitivity and conscientiousness. It also measures a variety of secondary traits, including optimism, overconfidence and excitement-seeking.
If you must know, I scored low on:
I scored above-average on
My score was high for
And I scored "very high" on
Although being rated highly agreeable came as a bit of a surprise to me "“ and perhaps will be a genuine shock to my family and my editors "“ the rest of my scores seem on target. The test seems well-designed, perhaps because it was put together largely by Richard Peterson, a psychiatrist and neuroscientist who specializes in studying the behavior of investors and traders.
If you take the test, you get a personalized report that puts the findings in context and shows you how to use your scores to pinpoint your weaknesses as an investor. You can also learn more about what the results mean in a short research paper.
Best of all, this is one of the rare risk-tolerance tests that won't put you on a contact list for a broker or financial planner to pester you into forking over your money.
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The test is for real and they *will* give you a score (I’ve taken this before)….but I suspect their server is overwhelmed by the number of people clicking on their link today as a result of this article. Give it a couple of days.
"Investor Personality Test" is a scam. After they harvested my email address, I never received the test results or any other reply.
The two links to the test are not responding.
Total Return covers the latest personal-finance and investing news and trends, helping readers make sensible money decisions in a complex financial world. Send your comments, feedback and questions to totalreturn@wsj.com.
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