You May Be Doomed Without This Gene

Are great investors born, not made? However silly it may sound, it might be true.

For The Motley Fool's 2001 April Fool's joke, we explained that:

[T]he Human Genome Project discovered and isolated a DNA sequence that enhances financially related skills, specifically investing. According to scientists, your chances of being an above-average investor are miniscule if you don't have the "Investor Gene." The study -- a sampling of 1,000 subjects -- reveals that only one person in 10 has the Investor Gene.

We had illustrations of "Felix the Helix" explaining how DNA works, and we offered a free test, too, that used data about your nose shape and the oiliness of your skin to determine whether you had the gene. So when I read the following news item, my jaw dropped.

Three business professors have released a study finding, in the words of its abstract, that:

[U]p to 45% of the variation in stock market participation, asset allocation, and portfolio risk choices is explained by a genetic component. Genetic variation is a very important explanation for variation in investment behavior compared to the influence of education, net worth, entrepreneurial activity, and other factors studied in existing work. ... Finally, we find that twins who were reared apart still have similar portfolios.

Are you doomed?
Thus, logic would dictate that some of us lack the right genes for investing. But fortunately, all is not lost.

As we age, the experiences we gain and the people with whom we interact significantly influence our investing. In addition, the genetic contribution seems to be no more than half of any investor's total prowess; at least half of our fiscal skill, therefore, can be explained by what we learn throughout our lives, among other factors.

To make sure your experience makes the biggest possible contribution to your investing success, you should learn as much as possible, and implement the best advice you find.

In particular, learn from those who are good at investing. If there's an investor gene, I'll bet Warren Buffett has it. And how does he invest? He looks for companies within his circle of competence. He seeks a margin of safety by aiming to buy companies at good or bargain prices. This method has led him to many big dividend-paying companies, including Coca-Cola (NYSE:KO), ConocoPhillips (NYSE:COP), and Johnson & Johnson (NYSE:JNJ).

But you don't simply have to mimic Buffett's picks to be a successful value investor. For instance, if you look for stocks selling at reasonable valuations, but which have posted some solid growth in recent years despite the impact of the recession, you'll find plenty of stocks that Buffett doesn't own. A quick screen found some interesting candidates, including the following:

Data: Yahoo! Finance.

Obviously, that's just a starting point, though. You should do a lot more research before you buy a stock, looking at many more financial numbers to find out how healthy the company is, and how attractive its price is.

Last but not least, if you happen to have a twin sibling, take a look at his or her portfolio, too. If it's growing briskly, maybe that'll bode well for your prospects!