Yes, Your DNA Can (Sort Of) Make You Poor

Smart investment instincts might be inherited.

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Managing money is never easy, but people with significant cash troubles may be able to blame their DNA. An increasing volume of research suggests that genetics may play a role in wealth and influence how we make financial decisions. “It’s one piece, but it’s questionable how large or how small it is,” Ming Hsu, professor at University of California Berkeley’s Haas School of Business, told Fatherly.

“It may turn out one day that it’s a pretty substantial portion. We just don’t know yet.”

Back in 2014, Hsu and colleagues identified five gene variants that may impact financial investment strategies. This was the first study to isolate how these gene variants relate to the production of dopamine, a neurotransmitter which dictates (among other things) how we cope with risk and reward.

Hsu had 217 subjects participate in a computerized betting game, and observed that the degree to which players could learn to anticipate their competition’s moves was linked to variations in three genes which primarily affect dopamine function. Meanwhile, “trial-and-error” learning—or how fast they pivoted to change strategies—was associated with variation in two unrelated dopamine genes. The study didn’t examine whether either of these strategies make good investors, but it did raise the possibility that our genes play a role in mediating how we play betting games.

Of course, there’s no one gene for anything, and it is likely that tens or hundreds of genes are involved in influencing how we make financial decisions. Besides, there were a few obvious limitations to Hsu’s work—unlike most research in this field, he did not use twins as subjects to control whether the differences were due to nature or nurture. But then Henrik Cronqvist of the University of Miami confirmed Hsu’s findings with a much larger study of 15,208 Swedish twins. After controlling for gender, education, income and other variables, Cronqvist found that genetics alone explained up to 45 percent of the differences between individual investors and their penchants for financial risk.

Such genetic predispositions might cause people to default to more primitive instincts, such as avoiding risks and diversification, even when that makes poor investment strategy. “Some of our behavior as investors can be traced back to behaviors that have survived evolution,” Cronqvist told Fatherly. “In many domains in life, sticking to the familiar will help humans, but in the investment domain—with picking stocks, for instance—betting on the familiar may steer people wrong.”

But that doesn’t mean your DNA dooms you to a life of poverty and poor investment decisions. Cronqvist also found that experience working in finance can offset genetic predispositions and cognitive biases towards the safe and familiar. “Those with experience of finance are not driven by genetics to the same extent that those in non-finance professions,” he says.

Besides investing in an MBA to offset your genetic predisposition to crash markets, Hsu adds that genetic screening could help people who are prone to making poor money decisions become aware of their risk aversion or risk taking tendencies, and conquer them. “Genetic predispositions give you a clue of how you might want to behave to counteract or harness that potential,” Hsu says.

Richard P. Ebstein, professor at Hebrew University in Israel and head of the Scheinfeld Center for Human Genetic Studies in the Social Sciences, agrees that genetics likely plays a role in how we make financial decisions, but it’s not the whole story. “They determine, in part, our cognitive abilities, business acumen, professional skills and financial decision making,” Ebstein told Fatherly. “That being said, our genetic make up should not be seen as fully deterministic.”

As far as setting up your offspring for a bright financial future, Ebstein recommends looking to your partner. “If you marry an intelligent mate then you likely increase your chances of having intelligent children,” he says. “And IQ is correlated with not only income but also overall health.”

“So be careful who you marry.”

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