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Raise your IQ, invest in stocks
Old 01-06-2012, 09:36 AM   #1
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Raise your IQ, invest in stocks

My title is a bit tongue-in-cheek.

Here is the article from Larry Swedroe,
A sign of a higher IQ is investing in stocks - CBS News

High-IQ investors are more likely to effectively diversify, holding mutual funds and larger numbers of stocks. Thus, they experience lower risk and earn higher Sharpe ratios, which measures risk-adjusted performance.

High-IQ investors are also more likely to hold low-beta stocks and have more exposure to small-cap and value stocks, resulting in higher Sharpe ratios.
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Old 01-06-2012, 10:05 AM   #2
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I'm with Warren. IQ is helpful but only to a point. Beyond that point, you begin to think you can pick stocks and call markets. I think humility and a strong stomach are much more important.

And if I claim to be a wise man, it surely means that I don't know.
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Old 01-06-2012, 10:15 AM   #3
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From the article,
Sure enough, it seems the smarter you are, the more likely you are to invest in stocks.
To me, this is a no-brainer. Assuming

* a high IQ predicts high likelihood of success in college, and
* a college degree results in higher income.

Then, those with high IQ's have higher income than others, on average. So, it seems logical that they would have more excess income to invest.
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Old 01-06-2012, 11:40 AM   #4
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Let me disagree a little bit.
A high IQ may lead to high education and better job. There are also folks with high IQ but poor attitude and drive and did not go far.

Investment in the stock market does not reflect high IQ, although perhaps most people with high IQ are successful, have more discretionary income to be in the market.

When I was younger, I joined an informal Stock market club composed of older men. I was the youngest and inexperienced of the bunch, but I was probably the most educated. After a while, despite, being the neophyte of the group, these seasoned men believe in my recommendation and stock picks. I myself is fooled that by studying each stocks and trends, I'm beginning to be good at it-- that is until the market crashed!!!

I found out that most of the info. out are obsolete by the time the reg. man reacts to it, and I was just riding the wave of good luck, and investing when the trend is going up. It's all a crap shoot. Or a dart shoot.

Your IQ can only get you to a certain extent, market cycle can be inefficient and complex, nobody knows what will come next/
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Old 01-06-2012, 01:02 PM   #5
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Here is the 2nd article about high IQ's and investing:
Being smarter means a better investing experience - CBS News
High-IQ investors' stock picks and execution skills result in a 2.2 percent per year spread between the portfolio returns of high- and low-IQ investors. This 2.2 percent spread ignores differences in market timing arising from moving cash into and out of the market. The spread jumps to 4.9 percent per year when IQ-related differences in market timing are accounted for, including the tendency of high-IQ investors to avoid market participation when returns to stock investing appear to be low.
These studies are about groups of people. So it doesn't necessarily apply to an individual except in a probabilistic way.

Of course, if you recognize you are not all that brilliant, you can go the index route. Or you can go the low-ER balanced route (Wellesley, Wellington).

I'm sure each person reading this thread is a high-IQ (or honorary high-IQ) investor. Just reading this stuff makes you smarter. Especially if you agree with my comments.
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Old 01-06-2012, 03:17 PM   #6
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Investing in individual stocks can give you high blood pressure.I don"t know what my I.Q. is,but I feel a lot wiser since I"ve become a passive investor.
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Old 01-06-2012, 03:24 PM   #7
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Is it the higher IQ that leads people to invest their money, or do people with higher IQ's think they can produce above average investment results because of their IQ's? I worked with lots of very smart people who were always after the latest hot stock tip and shied away from passive mutual funds.

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