Genes Explain About 45% of How You Invest
A Swedish twin study that matched DNA against financial portfolios found genetics explain nearly half the differences in investing habits.
My First Million · I put 80% of my money in the S&P after a billionaire investor told me not toGenes explain about 45% of the differences in how people save and invest. Researchers in Sweden who compared thousands of twins concluded that genetics account for nearly half the variation in savings and investing behavior.
The study relied on Sweden's unusual data. The country keeps a large registry of twins for health research, and until 2007 it had a wealth tax that required citizens to report their entire financial portfolios, from stocks and mutual funds to savings.
The researchers compared fraternal twins, who share about half their DNA, with identical twins, who share all of it, across 30,000 pairs. By comparing how the two groups scored on the six measures, they estimated that genetics account for about 45% of the differences. The six biases the researchers measured were holding too few stocks, trading too often, chasing last year's winners, favoring home-country stocks, betting on lottery-type stocks, and refusing to sell losers.
Questions people ask
If investing is 45% genetic, does that mean I cannot improve?
No. The estimate means genes explain about 45% of differences between people, with the rest coming from everything else the study did not attribute to genes. The 45% is a population average, so it does not say whether any one person can improve.
What about twins who were raised apart?
The researchers checked separated twins and other outliers as part of the design. The reporting does not give a separate result for them, only that they were included as a check.
Does a Swedish result apply to Americans?
Probably in broad strokes, though the exact number could differ. Basic biases like trading too much and refusing to sell losers show up in American brokerage data too, but taxes, retirement accounts, and culture change how they appear.