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Birth Order and Behavior

One of the questions I am often asked is does birth order influence your behavioral style?

Well, based on the research we have performed, birth order does not influence your natural behavior. When I say natural behavior, I mean the core “hard-wired” behavior which is based on genetics and then shaped into you up to 3 years old. The natural behavior changes very little throughout your life. Understanding the influence of natural behavior is important because it is very influential on your life motivations and hence how you make decisions.

In some families you see the eldest child being the more dominant, independent, and risk taker type with the youngest being the more engaging and harmonious type. Then, in another family with the same number of children it is exactly the reverse. There is no trend either way. Further, you cannot predict which child will be more successful. The same is true of single children families. The only child could have any type of behavioral style across the full spectrum – dominant, harmonious, risk takers and creative. Generally, when there are 2 or 3 children in the family they will be very different. However, when there are 4 or more children then you may have 2 who are quite similar, yet they will still be unique.

What I would say is that the birth order could nevertheless influence some aspects of the longer term personality development which takes place after the age of 3 years. This will be because as children are born circumstances or environments in that family change and the opportunities are different for each of them. In some cases, the presence or influence of one or both parents may differ. For instance, I have seen a bankruptcy in a family have a great impact on the 2 eldest born because they had a lot taken away from them whereas the youngest 2 children hardly lived through it. Similarly, the death or serious illness of a parent could have a different influence on the eldest and youngest children. Or even a divorce. Also, there can be other factors such as the way in which one parent connects with one of the children e.g., the father with the eldest daughter or mother with the youngest son. So, what I am saying is that these types of factors are all an influence on personality and the birth order could matter. The influences on the personality development are much more specific situation driven.

Overall, I would say it is difficult to make definitive predictions of personality based on birth order. This is particularly because evidence shows the core natural behaviors which are foundational to personality development do not relate to birth order. It is difficult to say that the eldest child will always behave a certain way, then the middle children and the youngest child will also behave a certain way. The make-up of every family and the circumstances each lives through are different. That is as far as it goes. Therefore, there are no rules which generally apply.

Discover Your Investment EQ

The most common cause of low prices is pessimism It’s optimism that is the enemy of the rational buyer.
- Warren Buffett

Ask a group of investors to share the secret to successful investing, and youre likely to get many different quantitatively focused answers, ranging from, hold for the long-term, diversified asset allocation, quality research to the much touted buy low, sell high mantra.

However, recent research into the human mind has found that the secret to success in any long-term endeavor, whether it be in business, relationships or investing, is an attribute called Emotional Intelligence (otherwise known as EQ). EQ is a type of intelligence thats significantly different to the standard IQ-based definition of smart were all used to. The topic of EQ has received significant coverage in the business world in the last few years, fueled in particular by Daniel Golemans books which are aimed at helping business people use the skill to further their careers and effectiveness.

Following the four facet Goleman model for EQ, the emotionally intelligent investor would, for instance, make investment decisions calmly based on a higher consciousness of who they are and with a positive personal relationship to money (the first facet of self-awareness). This is instead of making decisions based on an emotional impulse which sabotages their financial position. They also handle stress, disappointment and uncertainty more rationally, and dont allow those feelings or circumstances to control or initiate their decisions (the second facet of self management).

Going further, the emotionally intelligent investor would also understand the emotions of others such as their partner, spouse or family members, recognizing them and responding with empathy (the third facet of social awareness). Finally, a person with high Investment EQ would have the ability to maintain quality relationships with others around them when making investment decisions knowing how to, effectively and appropriately motivate them and manage their money energy using subtlety, delicacy and tact (the fourth facet of managing others).

But the role of EQ in investment has been little publicized, even though its application can be invaluable for investors. Whether this is because the investment process is seen as an objective, numbers-based, non-emotional process, or whether the investment industry has simply not been made sufficiently aware of the existence of EQ, is unclear. Certainly, we believe that both a high level of EQ, combined with sound financial knowledge, strategy and advice, can make the difference between great investors and the also-rans. But sound financial knowledge will not do it alone.

So why is understanding Investment EQ so powerful? It is the ability to give a person enough confidence, focus and rationality to remain committed to their strategies even when the market value of their portfolio is declining, not living up to expectations, or being superseded by other strategies. Investors with a high EQ, in the long term, worry less about their investments, reap higher returns, and make fewer mistakes.

Daniel Goleman, with his co-authors Annie McKee and Richard E. Boyatzis wrote in Primal Leadership, Negative emotional surges can be overwhelming; theyre the brains way of making us pay attention to a perceived threat. The result is that these emotions swamp the thinking brains capacity to focus on the task at hand, whether its strategic planning or dealing with news of a drop in market share. For investors, the perceived threat, whether it be sluggish investments or a drop in portfolio value, causes the brain to be overwhelmed with negative emotions. Without EQ, or an awareness and ability to manage these emotions, they can and do cause havoc for individual investors, and on a larger scale, for investment markets generally.

Its a reasonably well-documented fact that chasing last years great performers is a poor investment strategy. However, thats how many players in the investment game, even seasoned investors, have made decisions. How often do you see investors with a strategy then not stick to it? It hurts to see someone else doing better than you are, it hurts to see your portfolio performance lagging behind the investment of the moment. Its not the feeling of hurt per se that causes investment damage, but allowing it, even subconsciously, to determine your next investment move.

Emotionally intelligent investors are like the patient driver, sticking to their lane. This doesnt necessarily mean that theyll put up with a poor investment past its used-by date. However, because they have researched their strategies thoroughly, invested in asset classes they understand, and undertaken the volatility level they know they are comfortable with, these investors are able to operate above the emotional level, sticking to their plans unless there are reasonable and rational arguments to do otherwise. They take time to rationally consider their past successes and mistakes, and analyze possible consequences before making the deal.

However, emotionally unintelligent investors often let fear or panic take control, and are more like the aggressive driver, switching lanes whenever something more profitable comes along. They are often after the quick kill, looking for that one deal that theyre going to be able to talk about for years to come, even if this desire is subconscious. These investors often commit to investments they know little about or are not suited to, and when things dont go as planned, panic and confusion sets in ? the worst possible state of mind in which to be making investment decisions. This is certainly not a deliberate strategy, but when our brain chemistry reacts to danger, it causes us to become emotionally charged ? a fight or flight reaction.

Another dangerous trait of the emotionally unintelligent investor is that theres a high likelihood he or she possesses an inflated ego. Research shows that most investors believe, even subconsciously, that they have an edge on others in the market, that they have better intuition than most players and that their technique, whether it be watching stock indices, predicting the behavior of businesses or CEOs or taking the pulse of the investment community, is inherently better than those techniques employed by others.

Ask most players in the investment game which investor they would most like to emulate, and there are good odds that most of them would answer Warren Buffett. Buffett is a prime example of emotionally intelligent investing. His success, in his own words, is not a result of academic-style intelligence, luck or intuition, but rationality, a key factor of EQ. It was this rationality that keeps Buffett committed to his strategy. During the tech bubble, Buffett was widely criticized for not investing in technology stocks, despite their meteoric rises. His rationale was that he didnt understand them, so he wasnt going to invest in them ? an approach that caused more than one of his critics to label him irrelevant. But even if tech stocks hadnt had their dramatic rise and fall, from an EQ perspective, Buffett still did the right thing ? he stuck to his very rational and logical guns ? guns which he knows intimately.

Discovering Your Financial EQ

The good news is that your Investment EQ can be developed. The starting point is with you learning more about your Financial DNA. The following steps will help you with developing your Investment EQ:

? Using the Financial DNA Core Life Profiles, understand and accept your natural instinctive propensities to risk. This will provide very predictive insights into how much uncertainty you will be willing to bear over the long-term and hence how committed you will be to a long-term strategy particularly, when under pressure.

? Then complete the Financial Directions Profile to understand the influences of your environment, experiences and education on the preferences you have for making investment choices. There will be investment strategies which you will have a greater aptitude towards based on what you have learned, whether they be in the stock market, managed funds, real estate/property or with other investment classes.

? Then analyze the Financial Behavior Analysis which documents your complete Financial DNA. This involves reviewing your level of investment alignment by comparing your natural instinctive propensities based on how you are hard-wired to your learned preferences.

? Another important step will be comparing your Financial DNA to the good and poor financial decisions you have actually made in the past. This will help you pinpoint the investment decisions you will be comfortable in making and to identify areas where greater investment education is required.

? Finally, use this behavioral knowledge of your Financial DNA to help you become personally aligned and become more aware in an overall life sense of what decisions you will be comfortable with. The overall dynamics of your life will impact every investment decision and the lives of others you have relationships with.

For more insight into this topic, please read Hugh Massie’s book:
“Financial DNA – Discovering Your Unique Financial Personality for a Quality Life”.

Being or Doing

I am meeting and communicating with an increasing number of people who are searching for more meaning in their life. Or put another way discovering their life purpose.

To be honest, a lot of what many people are doing is just searching. Life purpose discovery is difficult and in many ways a journey in its own right. However, the process of discovery does become easier if a process is followed and you have a way of thinking about it.

I recently read a great book on life purpose, and by chance today found out that Oprah is currently doing a series on it. The book is “A New Earth – Awakening to Your Life’s Purpose” by Eckhart Tolle.

The concept Tolle puts forward is that you firstly need to find your inner purpose – which in essence is your consciousness. The first step is to become more conscious of who you are and get into a state of Being. To a large degree this is being comfortable who you are at the core and going with the flow. Then once you have reached a higher degree of consciousness and your ego is no longer running your life then it is about finding your outer purpose – the awakened Doing. This is a lot more about what you do based on being awakened through a higher level of consciousness. Ultimately, both the Being and Doing have to be integrated and are closely related, but the Being comes before the Doing. The key point here is that the Doing will change during your life as your environments and passions change, and the core of YOU is your Being.

How do you find your awakened Doing? Tolle says there are 3 modalities: acceptance – what you willingly do now, enjoyment – what you enjoy doing from the aliveness that flows into it, enthusiasm – means there is deep enjoyment plus the added element of a goal or vision that you work toward. In whatever you are doing, you are able to enjoy Being. I really believe this is a great model to help you connect your inner self to your outer world. Much of the Financial DNA approach is centered around behavioral assessment tools to help guide people find where their inner zone is for their life and then once comfortable with that integrate their money and life decisions. Whilst our approach is to some mechanical it does connect you to your energy and help raise your consciousness. Those who are truly able to make committed decisions for their life and finances usually have found their inner zone. What I then see is clearer goals, and less decisions based on emotions and ego.

So, start working on how you can raise your consciousness.