What your MBTI says about your investing style

Have you ever wondered why some investment advice just doesn't seem to work for you, even though others have found success with it?

The MBTI (Myers-Briggs Type Indicator) offers a framework that offers explanations (though not complete) to the complexities of how we perceive the world and make decisions. 

It has been used for decades by organisations for hiring purposes. It has also found resonance, particularly among younger folks, through which they look to understand their inner worlds. 

Relating to investing, how you process information, deal with emotions or how much influence external opinions have on you will shape what an ideal investment strategy looks like, uniquely to you.

Are certain personality types better investors than others?

When it comes to investing, certain traits are often cited by successful investors, which are: discipline, patience, analytical thinking, and emotional stability. 

Warren Buffett, one of the most successful investors of all time, famously said: “The most important quality for an investor is temperament, not intellect." 

Similarly, co-founder of Oaktree Capital Management, Howard Marks once stated, “The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological."

It's important to note that your MBTI personality type alone does not grant you the status of a good investor. It provides insights into your tendencies, but successful investing also requires knowledge, experience, a good strategy, and so much more.

No matter your MBTI type, you can develop the skills and habits that are essential for successful investing. Building a strong sense of self-awareness is a good starting point to tailor your investment approach to tap on your strengths, and mitigate your weaknesses. 

The 16 MBTI personality types and their relationship with money

The MBTI categorises personalities based on four dimensions, resulting in 16 distinct types: Extraversion-Introversion (E-I), Sensing-Intuition (S-N), Thinking-Feeling (T-F), and Judging-Perceiving (J-P). 

Analysts (INTJ, INTP, ENTJ, ENTP):

Analysts are meticulous and spend time researching and comparing options before making decisions. They are likely to have clear savings goals and plans to achieve them.

Diplomats (INFJ, INFP, ENFJ, ENFP):

Diplomats are idealists who find more interest in meaningful pursuits than in financial wealth. They may not always have clear guidelines on their personal spending.

Sentinels (ISFJ, ISTJ, ESFJ, ESTJ):

Sentinels view money as a necessity and are very cautious with it. They consider expenditures carefully and tend to be conservative and pragmatic, adhering to budgets.

Explorers (ISFP, ISTP, ESFP, ESTP):

Explorers enjoy adventure and new experiences, often spending more on travel, entertainment, and hobbies. They may sacrifice their needs to pursue their interests.

Investing styles of the MBTI types

Sensing vs. Intuition (S vs N):

Sensing investors focus on concrete data and real-time market information.

Intuitive investors prioritise the big picture and long-term trends.

Thinking vs. Feeling (T vs F):

Thinking investors emphasise risk management and stability, using systematic and disciplined approaches.

Feeling investors value ethical and socially responsible investment choices, emphasising collaboration and consultative decision-making.

Judging vs. Perceiving (J vs P):

Judging investors prefer structured investment strategies, creating detailed plans and strictly adhering to them. This approach often involves regular, scheduled rebalancing of portfolios to maintain a predetermined asset allocation.

Perceiving investors adopt flexible investment strategies, quickly adapting to market changes and adjusting decisions based on new information. This approach may lead to more frequent portfolio adjustments and market timing issues.

Academic perspectives on personality traits and investment decisions

Beyond the MBTI, extensive psychological research shows that personality traits significantly impact various life outcomes, including investment decisions. 

A 2023 study of over 3,325 affluent American investors found correlations between investment styles and traits like extraversion, agreeableness, openness, conscientiousness, and neuroticism.

For instance, investors high in neuroticism tend to be more pessimistic about stock returns and believe in a higher likelihood of market downturns. High neuroticism reflects emotional instability. They also frequently check their portfolios, a tendency known as the "meerkat effect."

The study also finds that high openness correlates with a greater willingness to take risks.

Different personalities approach investment decisions differently. The same study indicated that investors with low openness and high neuroticism are less likely to invest in stocks, driven by higher risk aversion and pessimistic beliefs about future returns.

Four tips to invest better regardless of your MBTI 

Build safeguards against your (irrational) self: Identifying your cognitive blind spots and biases can help you better understand how you react to information and events. Ideally, translate this understanding into a plan that ringfences you against making irrational, emotion-driven decisions, such as taking a dollar-cost averaging approach.

Diversify your portfolio according to your goals and risk appetite: A well-executed diversification reduces the overall risk of your portfolio. A classic 60/40 portfolio of equities and fixed income may not offer the same sense of security for two different individuals, so do what works best for you. 

Review your plans regularly: Regular reviews do not mean changing your allocations based on the latest market events or speculations. It is about setting a fixed schedule to evaluate your financial goals and ensure you are on track. You can start by doing so every 6 months, and here’s how to.

Professional wealth advice: Professional financial advisors can provide tailored investment advice. Opting for independent and fee-only advisors like Endowus can remove conflicts of interest and improve the alignment of your investments with your objectives. Schedule a one-to-one consultation with our MAS-licensed client advisors today.