Successful Investing May be Genetic

NEW YORK (MainStreet) — Your investment strategy may be less about conquering the Dow than your DNA. New research indicates that gambling decisions – and investment strategies – are influenced by the genetic components of our brains. In other words, successful investors like Warren Buffet may be born, not made.

Dopamine, a neurotransmitter – essentially a chemical that acts as a communications link among our brain cells -- is regulated by our genetic structure. Ming Hsu, an assistant professor of marketing at Berkeley and a member of the Helen Wills Neuroscience Institute, set out to identify specifically which genes were controlling dopamine functions in the regions of the brain that influence strategic thinking.

"This study shows that genes influence complex social behavior, in this case strategic behavior," Hsu says in a report published by Science Daily. "We now have some clues about the neural mechanisms through which our genes affect behavior."

The research provides insight into how human beings in gambling and investing situations may utilize trial-and-error learning and belief learning to anticipate and respond to the actions of others and form strategies. These functions were found to be associated to just three genes which control dopamine concentrations in a particular region of the brain. The study may be a catalyst for further investigation into how genetics can influence learning and behavior.

"If you think of the brain as a computing machine, these are areas that take inputs, crank them through an algorithm, and translate them into behavioral outputs," Hsu said. "What is really interesting about these areas is that both are innervated by neurons that use dopamine."

A dopamine deficiency can lead to mood swings, rapid weight gain and even Parkinson's disease. A loss of dopamine-producing brain cells can result in schizophrenia, depression and dementia.

"When people talk about dopamine dysfunction, schizophrenia is one of the first diseases that come to mind," Hsu said. "To the degree that we can better understand ubiquitous social interactions in strategic settings, it may help us understand how to characterize and eventually treat the social deficits that are symptoms of diseases like schizophrenia."

Hsu is collaborating with other researchers to determine which brain regions and types of learning are most important to success in life.

Last year, a study conducted by economists from the China Europe International Business School and the University of Washington analyzed 35,000 identical and non-identical twins in Sweden to determine if a genetic predisposition resulted in a preference for a specific investment style. The research determined that up to 25% of investment decisions could be attributed to genetics, noting that an individual was partially ingrained to be a value or growth investor from birth.

--Written by Hal M. Bundrick for MainStreet

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