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Pigeonholing Your Personality Traits

George C. Fisher

Do you consider yourself needy? How about disengaged? Ever imagine yourself as a smart guy or gal? When you look in the mirror, does the words participator or seeker ever come to mind? Before you off-handedly dismiss this pigeonholing of personality traits, let me provide the following definitions, quoted from a recently released investor survey.

SEI Investments (SEIC) is a global provider of investment processing, mutual fund processing and money management assistance to the financial services industry. SEI Canada conducted research focused on the educational needs of participants in defined contribution retirement plans. As part of their retirement account investment education services, SEI Canada studied individual investor’s behavior, and correlated their actions to investing knowledge, experience and education. According to SEI Canada , most investors can be lumped into one of five categories:

"Smart Guys and Gals (13% of survey) feel most knowledgeable, but exhibit the highest levels of overconfidence - opening them to the costly habit of frequent trading;

Participators (24% of survey) are almost as knowledgeable and are also overconfident - the difference from the Smart Guys and Gals is their desire for employer-provided education. These members are too comfortable about the future and lack focus on long-term risks and needs;

Disengaged (15% of survey) struggle with their plans, and do not have time or interest for them. These people are not involved in their financial decisions, and tend to use the default investment option more than other groups;

Needy (26% of survey) individuals form the largest group and while they struggle, it's due to confusion. These people have the lowest level of knowledge, and are the least comfortable in managing their plans.

Seekers (22% of survey) are worried and want support. They have an insatiable appetite for education and advice in the quest to seek comfort. Their knowledge level falls in the middle, but they are least comfortable with the ability of the pension plan to provide for retirement.”

While most of us don’t like the concept of stereotyping, this investment behavioral study, conducted in conjunction with Richard Deaves, Professor of Finance at the Michael G. DeGroote School of Business at McMaster University in Hamilton, ON, Canada , offers an interest perspective.

The research found that surveyed investor’s attitudes towards education and investment advice differ widely, as do their levels of comfort, confidence and knowledge regarding retirement plan management and investment decision-making abilities.

According to Professor Deaves, “While lack of knowledge is undesirable, thinking you know more than you in fact do know, or being overconfident, is dangerous for pension plan members. The former leads to indecision and the desire for education and advice, the latter can lead to misinformed decision-making.”

Evaluating our current investment attitudes and mindset assists in furthering our own financial education, with the ultimate goal of gaining sufficient knowledge to create and maintain adequate retirement assets and income. The first step of an educational process is to determine a starting point and reference to measure growth.

Personally, I’ll pigeonhole myself as a Smart Guy and Gal, and I try my hardest everyday not to be overconfident or to engage in the costly habit of frequent trading.

And you?

George C. Fisher is a 30-year veteran in DSP/DRIP investing. He is author of All About DRIPs and DSPs (McGraw Hill, 2001) and The StreetSmart Guide to Overlooked Stocks (McGraw Hill, 2002). Mr. Fisher is an avid dividend reinvestment advocate and utilizes the strategy with all dividend paying stocks, both at the broker and direct with the companies using their DRIP programs.

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