Jul 11, 2023  | Tags: personality, investing

Our insights

Retirement planning is different for everyone, and personality matters.

Sure, we all have work-based superannuation plans but do you know how much money you have in super right now?

How about what kind of plan it is invested in?

What other investments are you making now to plan for your retirement?

A notable study revealed that how we think about retirement planning is linked closely to our personality.

American psychologist D.W. Fiske theorised in 1949 that there are five broad personality traits – extraversion, agreeableness, openness, conscientiousness and neuroticism.

The traits are not considered mutually exclusive and people may be considered to rank highly in more than one.

When it comes to investment and retirement planning, the study found investors with one of these personality traits tend to enjoy significantly better outcomes.

The conscientious investor

Conscientious people are often workaholics or perfectionists - sometimes both.

They pay attention to detail, are never late and like to work with orderly, rigid schedules.

People with these personality traits tend to have the most successful careers and that success flows through to their investment strategies.

The key takeaway here is “planning”.

You don’t need to be earning a lot of money to plan well and make sound financial decisions for retirement.

Conscientious investors generally avoid making financial mistakes that have negative long-term implications.

They are keen to learn and soak up advice from experienced financial planners.

But they are prone to inflexibility and stubbornness and have trouble altering course if advised to react to changing economic winds.

The neurotic investor

Neurotic people are prone to stress and are associated with feelings of anxiety and mood swings.

They are pessimistic by nature and more likely to turn to family or friends for investment advice rather than a financial planner.

They shy away from the share market and favour safer, lower risk investment strategies.

While this satisfies the neurotic investor’s risk-aversion mentality, it can have a negative and restrictive impact on their long-term wealth accumulation which impacts retirement.

This particularly holds true if the investor is on a middle income with many years left in the workforce and fails to take advantage of a bolder, more adventurous, wealth-building strategy.

The extraverted investor

We all know an extravert.

They are normally the most fun, the loudest in the room and often “know everything”.

The biggest danger for the extravert investor is their impulsiveness, leading to the danger of them making bad, short-term investments.

This can be exacerbated by risky investment strategies with borrowed money.

The extravert understands the importance of retirement planning - they just need to adhere to some sage advice to avoid the danger of suffering expensive setbacks.

The open investor

Open people are normally imaginative, creative types who are happy to try new things and are not resistant to change.

It is the personality type most closely associated with higher intelligence. 

Open investors take greater time and effort to thoroughly research their investment strategies before settling on them.

They are flexible and are also the most likely to turn to the share market because they don’t fear the volatility that it can bring.

This can produce positive outcomes in the long term, which bodes well for retirement planning.

But their imagination can run wild, leaving them prone to making impulsive decisions or chasing unrealistic financial goals.

The agreeable investor

Agreeable people are caring, empathetic and love helping others.

They make great business partners.

But their personable, trusting nature can see them easily swayed and leave them open to financial exploitation such as investing in scams - this is obviously a big concern particularly as these personalities get closer to retirement age.

There is a much weaker correlation between agreeable people and any significant impact on investment strategies.

However, there is some evidence to suggest that less agreeable people tend to enjoy more success in their professional careers.

Working with your personality traits

Understanding your personality traits can be useful not just for yourself but the financial planner you choose to work with.

By choosing investment strategies that complement your personality traits, the investor is likely to be more motivated to stay on course with the retirement plan, producing the best possible outcomes over the duration.

Equally, by acknowledging your fears and weaknesses, investors may be able to overlook their biases and avail themselves opportunities they would not ordinarily entertain, hence enjoying a better result.

Financial planners who understand the personality traits of their clients will educate them on the benefits of products and strategies they would not normally consider.

Get advice today

Regardless of your personality traits, some basic rules of thumb apply when it comes to investing, with three key questions to be considered:

Your financial goals - what is the financial outcome you wish to achieve?

Your risk tolerance level - how much potential volatility are you willing to endure?

Your time horizon - how long are you prepared to invest for?

A better understanding of your personality, what makes you tick, can help you and your financial advisor tailor an investment plan for your retirement that satisfies you.

Calder Wealth Management are financial experts who can help you make the best financial decisions  now and going forward.

We’ll work with you to devise a plan that aligns with your unique financial goals, investment preferences, risk tolerance levels and time perspective.

There really is no substitute for quality financial advice from someone personally invested in your future.

At Calder, we pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to discuss all of your financial needs and concerns.

Written by James Herriman

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.