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Take a psychology test on your relationship with money!

What in our psychological makeup makes us good at investing or earning money? Or losing and spending money? Do you or I have the mental tools to be a good investor or trader? If you are reading this site you probably want to act smarter with your money and investments and I have discovered some tools that I think can help us learn more about our psychological makeup in relation to money and hopefully choose financial options that fit our personal profiles.

I have discovered a host of psychological tests relating to money and investing at www.marketpsych.com. The site is managed by Richard L. Peterson, MD. They are experts on the psychology of markets, investors and traders and provide speeches and workshops for many of the leading money managers and brokerage firms. On their website they offer free psychological tests on a variety of financial subjects. I have discussed with Dr. Peterson why they give away these valuable tools for free, and he told me that the tests allow them to collect data to further their studies in market psychology. At one time, they charged for the tests but were not getting enough test takers to build a good data base. I find the tests to be of excellent value and have learned a lot from the couple I have taken.

I would like to start some discussion here on personal results from some of the tests offered by Market Psych. Every two weeks or so, I will select one of the tests, provide the link, take the test and share my results here. I would like you, our avid readers, to take the same test and provide some comments on your results. For our first test let us take the Success Psychology Test. Registration is required to get your results which will arrive almost instantly by email or you can read them online.

OK, here I go testing……….. Finished.

Results: I score an A- overall with A- being my score in the categories of Abundance, Drive, Efficiency and Optimism. I scored a B+ on Discipline.

I find my results interesting in that I would rate my success to date at barely average. However, I recently have started a couple of new ventures that I am very optimistic about, so that may be reflected in my relatively high grade.

Now you take the test and let us know how you did or what you think. As I said earlier, I will put up another test for results and feedback in a few weeks, so try to hold off doing more of the tests. They are fun and interesting, just ask my wife who really was interested in her results and quickly took several of the tests.

The neurobiology of risk: the ventral striatum

The ventral striatum is a relatively small area tucked deep inside the brain near the basal ganglia. Until recently, not much was known about it. But it’s recently been linked to reward, decisions, and risk, and as a result is getting much more press than it used to. It’s important in what we perceive as rewarding (such as status and keeping up with the Joneses) and how rewarding it is. It’s been linked to pathological gambling, and it matters when you’re thinking about what to do next with your portfolio.

The ventral striatum consists of two portions, the nucleus accumbens and the olfactory tubercle. Its most important neurotransmitter–to our current knowledge–is dopamine. Dopamine is associated with pleasure and with motor functions. (Dopamine-increasing drugs are used to treat Parkinson’s disease.) The ventral striatum is closely linked with the limbic system, which involves emotion and motivation: it receives input from it and sends output to it, mainly inhibitory. It’s thought that the ventral striatum helps to suppress certain mechanisms in the limbic system, thereby selecting the appropriate ones and silencing others.

When you consider all that, it’s a natural nominee for the reward center of the brain, and that seems to be its function. There have been several studies recently that look at different kinds of reward, and they all light up the ventral striatum. As described in the Society for Neuroscience, anticipating financial gain increases dopamine in the ventral striatum, which increases pleasure. Thinking about loss, on the other hand, decreases dopamine. It turns out that most people are more sensitive to decreases of dopamine than increases, which is where risk aversion comes from. The ventral striatum tells your limbic system that the behavior you’re considering is risky or that the loss you’ve just suffered is a bad thing, and the limbic system tells your conscious mind that it feels bad about what just happened, which affects your decision-making.

The ventral striatum is a tiny structure with big effects on our behavior. Most of decision-making, including financial decision-making, includes processing risk, which includes weighing rewards and losses. The ventral striatum is instrumental in modulating those behaviors and processes.

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