Psychology of Money: 24

Some of us are more risk averse than others. Economists, psychologists and people who want our money have known this for a long time. Broadly, women are more risk avoidant than men (for the money as security reasons highlighted in the Psychology of Money: 10.)

Neuroscientists even have brain imaging evidence that shows how risks ricochets around our in our heads:

“Nucleus accumbens activation preceded risky choices as well as risk-seeking mistakes, while anterior insula activation preceded riskless choices as well as risk-aversion mistakes. These findings suggest that distinct neural circuits linked to anticipatory affect promote different types of financial choices and indicate that excessive activation of these circuits may lead to investing mistakes.”

 To find out whether your brain is hard-wired against “rational” financial decisions, take this risk assessment test.

Remember, the ideal isn’t necessarily risk balance (at least in the short-run) … it’s taking the amount of risk you’re comfortable with and which is in line with your financial objectives. Over the longer term, if you want to live well during retirement, then risk balance does become the name of the game.

My score reveals I’m average. I wasn’t always average – I used to be too high-risk in some areas and way too low-risk in others which is to say I wasn’t literate in how to spread risk to match to my goals.

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2 Comments

Filed under Money

2 responses to “Psychology of Money: 24

  1. I took the assessment and learned I have a high tolerance for risk. I guess I’m not surprised.

  2. nathaliehourihan

    I need to take it again – I can’t work out if I am high in some areas and low in others and whether that’s driving my average rating or whether I am fairly “sensible” across the board – which would be surprising!!

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