Zweig on Investing and Socializing

Wall Street Journal columnist Jason Zweig reported that newly released data from Riskalyze (a California-based firm) reveals state-by-state patterns in investor risk tolerance—using responses from more than 458,000 clients of about 22,000 financial advisers (responses were scored on a scale of 20 to 90, with 20 representing the lowest tolerance).

“Perhaps unsurprisingly,” wrote Zweig, “New Yorkers scored near the top, at 85,” topped only by Nebraskans (90), with residents of New Jersey, Florida, and New Mexico near the bottom. “The differences across states,” he explains, “suggest that investors tend to be more willing to take risk when their neighbors also are, and less when those who live nearby are more timid.” Aaron Klein, chief executive of Riskalyze, told Zweig, “I think these results illustrate how emotional contagion can be real, and how much we’re affected by what our friends, families, neighbors and coworkers are thinking and feeling.”

Zweig offers supporting evidence from academic studies—including studies from Columbia, Syracuse and Harvard University—that “have found portfolio managers of mutual funds based in the same city tend to mimic each other.”

“With markets gyrating, unruffled serenity may become important again,” Zweig concludes, adding, “If volatility scares you, spend more time with family and friends who don’t obsess over stocks. You’ll be happier now—and, probably, richer later on.”