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Financial Happenings Blog
Saturday, April 28 2007

An article reported on the 25th of April in the Courier Mail, and in a variety of other media outlets, that intelligence was not a relevant factor in investment success.

The report was based on a study published in the 'Intelligence' journal, by the author Jay Zagorsky from Ohio State University.

This should be good news for everybody, as it demonstrates that a huge intellectual capacity is NOT required for financial success.  Indeed, if the basic steps to financial success are spending less than you earn, investing regularly in a diversified portfolio of growth assets and so on - well then it does not take great intelligence to do that.

Indeed, there is evidence to show that a large IQ MAY BE A DISADVANTAGE for investment success.

MENSA, a group for people with the highest of IQ's have an investment club.  Larry E. Swedroe, in his book Rational Investing in Irrational Times wrote that:

"The June 2001 issue of Smart Money (a US Investment Magazine) reported that over the past fifteen years the Mensa investment club returned just 2.5%, underperforming the S&P 500 Index by almost 13% per annum." (RIIIT, pg 6-7)

It really shows that intelligence is not an attribute rewarded by the market.  If I had to guess intelligence would lead people to actively try and think of ways to outguess and beat the market.  They would have been better with a buy and hold index strategy.  So would pretty much everyone!

Posted by: Scott Francis AT 01:02 am   |  Permalink   |  Email
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