Proof clever people diversify.

its true. Research shows that the higher people’s IQ:

  1. The more likely they are to invest in the stock market.
  2. The more diversified their portfolios are.

This is true even correcting for variables such as wealth.

IQ scores are gathered from Finnish military data (all men have to serve) together with estimating. Women’s IQs are estimated using their brother’s score together with other information. Is the shared family intelligence based on nature or nurture?

This can be interpreted to mean that the intelligent thing to do is diversify. It could also simply mean that people with higher IQ scores are more likely to be influenced by modern portfolio theory.

Another weakness is that it appears to look at the top ninth of the population, so we are looking at relatively intelligent people, but not really the brightest (and IQ may be too blunt an instrument to separate out that group).

2 thoughts on “Proof clever people diversify.

  1. Hmm, interesting spot, but it could indicate many things. For instance, it could indicate that people with the highest IQ earn the most, and so have more money to invest, and that they are more likely to use professional advisors, who diversify as a matter of course.

    (I presume it didn’t find out whether high IQ investors did better overall, or what % of their assets were chewed up in fees? ;) )

  2. They corrected for wealth, so its not that they had more to invest.

    They did not test for the other things, but now that someone has got hold of the data, I think these should be a lot more studies based on it.

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