After many years of blogging, and consistent with my desire to move toward retirement, we have ended the Insights blog. Thanks to Doug Bedell for his years of blog support.

Older Not Always Wiser (Financially, At Least)

Posted on December 16, 2010
Filed Under Business | Leave a Comment

Be more mindful of your investment options as you grow older. You’re more likely to make snap, unprofitable, decisions as you age, say neuroscience researchers.

Interesting. It’s young people who are supposed to be more impulsive, but maybe that doesn’t hold for money management at the investment level.

Technology Review advises that “Recent research suggests that sometimes older people make riskier and less logical investment decisions than younger people, and that specific changes in the brain associated with aging may underlie those decisions.”

Maybe that explains why this writer made a snap “switch to money market funds” decision during a downturn in the ’90s that he has since regretted and why we all need to be mindful of what may be going on in our nucleus accumbens as we age. The accumbens (highlighted in yellow in the photo here) is an area of the brain that’s more active “when people anticipate making money or taking a financial risk, Technology Review explains. “Another part is more active when they anticipate losing money or avoiding a risk.”

As our population ages, scientists are seeking a better understanding of what goes on in the brain as the years pass. “Economic literature over the last five to 10 years suggests that older people’s investments on average tend to  perform poorly relative to the risk they are taking on.”

“The brain tends to shrink with age, and certain cognitive functions, such as working memory  – the ability to hold information in the brain for a short time – decline. ‘But we are learning that is just a part of making financial decisions, and it may not even be the deciding factor,’ says Brian Knmutson, assistant professor of Psychology and neuroscience at Stanford University,” according to Technology Review.

Financial regulatory agencies are interested in these aspects of brain research, not to mention those of us who may be at greater risk of causing self-inflicted damage to our portfolios. The National Institute of Aging is funding research into the brain’s investment heft.  – Doug Bedell


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