Current Events and Psychology: Intelligent Quotient in Investment Decisions

Abstract

In this assignment, the facets of the Intelligent Quotient are determined and evaluated in relation to a current related event. In the initial section, the assignment provides a clear definition of the term under study as well as other related aspects of IQ. Moving forward, the research paper provides descriptions of the related current event which includes relevant information as well as facts behind the issue. Subsequently, the research paper expounds on how IQ is applicable to matters pertaining to investment decisions. Furthermore, the research paper presents a section that highlights probable solutions to the problem at hand.

Intelligent Quotient in Investment Decisions

Intelligent Quotient is a score attributed to different people with respect to a given set of standardized tests that are formulated to measure the level of intelligence within human beings. The level of intelligence of any given person is highly attributed to such facets as morbidity, mortality level and the social statuses of parents and in other cases the level of IQ of one’s parents. Thus, it is safe to assume that the level of IQ one possesses is efficiently different from one person to another.

The establishment of the IQ is developed on “intelligence known and unknowns”. According to McDaniel (2006), people differ from one another in the manner of their capability to understand sophisticated matters presented to them concurrently. Furthermore, individuals are perceived to adjust differently to given sets of environments as well as learn from the experiences brought forth by the aforementioned environment in a rather different way. Thus, the fundamental research put forth to comprehend this behavior led to the formulation of IQ to assist in bringing about formidable grounds for devising clarity and organization abilities of people (Devlin, Michael, and Roeder, 1997).

In the effort to comprehend matters pertaining to IQ, necessary scientific measures have been put in place to support research concerned with identifying and distinguish the different features involved with high-IQ. These scientific measures have taken to include psychometric testing procedures that are used to determine relevant-IQ features in practical environments (McDaniel, 2006).

In addition to this, there are different levels of IQ tests; some involve conducting simple and single tasks while others are wide and complicated in that matter. Such capabilities as cognitive skills are the ones which are strengthened in the process of determining high-level forms of skills. Cognitive attributes include reasoning skills, skills concerned with making relevant and fast decisions, such as memorizing skills.

Application of IQ tests has been applied to a wider sector in education, businesses, as well as in the military services. Its significance to the society has brought forth immense efforts to improve on the matter as a whole. Through such philosophies as Eugenics, which encourages the improvements concerning inheritable traits of human beings using numerous forms of intercessions, are devised for talent identification purposes (McDaniel, 2006).

On the other hand, there is Neurothetics which is concerned with matters pertaining to the social ethical and legal matters. In particular, it concerns itself with the devising explanations, reflecting on how accumulated wealth can influence people whenever making decisions that target the human genetic sector. Numerous advents and innovations have been made concerning human genetic engineering and proposals that have been put forth to allow exploration of impositions and improvisation of hereditary traits into developing human beings which successfully embrace inherited traits from parent sources.

Specifically, the issue to be addressed in this assignment is concerned with determining the differences between high and low – IQ potential investors of stock markets. According to Shiller (2012), there is an intense relationship between high-IQ and sound investment decisions. It is safe to note that persons who possess high-IQ have a distinctive manner of diversifying their investment portfolios as compared to those with low-IQ scores. Furthermore, people who portray a high-IQ score are perceived as having taken immense levels of risks in making intense investments within the share market as a whole.

In addition to this facet, people with high-IQ levels have a way of selecting favorable forms of stocks in the market. The aforementioned research further depicted that these persons were instinctively aware of the need to participate in the stock markets of those companies whose operations were adhered to rather small-capitalization shares. This is due to the fact that these people had a way of identifying the penetration of the Company’s stock into a much wider market niche. Also, they relied heavily on the performance of these companies in relation to their high book values that reflected on their stock prices.

Certainly, those people who depicted high-IQ scores were perceived as having a way of constructing their investment portfolios to have a fair risk-return profile as compared to those who possessed low-IQ scores. It should be noted that since matters pertaining to IQ tests rely heavily on such facets as education, level of income as well as the immediate family background, it somehow becomes challenging to identify exact IQ-scores.

It is further noted that people with high-IQ test scores depicted almost a similar character trait which contended them to adhere to certain basic requirements for successful investments. However, it is noted that there are forms of contradictions that are put forth to allow easier investment decisions. For instance, the long-time belief that people should invest heavily in the stock markets is contradictory to the matter that financial markets assume the volatility presently faced.

High intelligence does not only rely on such IQ tests that are subjected to individuals but it also depends on such features as boldness, identifying trustworthy investment professions and also, depending only on those trustworthy individuals. According to Shiller (2012), the level of intelligence in successful investors was traced back to a larger yet significant part of the brain referred to as the “Broadmann area 10”.

Basically, this part of the brain is used to determine the differences used in making sound judgments pertaining to those in close vicinity so that their beliefs and actions are evaluated on the scale of favorability or un-favorability ratios. This manner of determining and scaling individuals is referenced back to the social intelligence capability of an individual and thus, differs from one person to another. Social intelligence is used to reward those people with high-IQ intelligence while disregarding those with low-IQ intelligence.

People with high-IQ tests understand that they have to make sound decisions whenever they are obligated to make a judgment about others. It is safe to assume that their ability to stay on a fair platform in the investment market highly depends on how well they judge the conduct of professionals. This form of intelligence also facilitates them to distinguish between positive analysis and those which are considered to be of mere insignificance in investment decisions.

Thus, the fundamental issue to be addressed in this argument is on the manner in which people, irrespective of their educational background as well as family status, can develop more trust towards investment professionals in the effort to drive them into developing investment-culture.

The proposed solutions to this issue lie with the recent developments which have been made in the field of IQ. For instance, the move to improvise on human genetic engineering is considered to be a facet which fosters the increase in developing investment cultures irrespective of such internal as well as external facets as education, level of income, fear as well as social status of one’s family.

Investment agencies have also come forward to provide a favorable platform upon which people, irrespective of their infringements, can choose wisely which professionals to trust with their investment portfolios. With the development of the Dodd-Frank Act of 2010, potential investors are provided with a platform upon which they can use to make positive forms investments since there is the creation of an increased level of confidence. In this Act, consumers are allowed to make complaints that are later used to construct relevant rules and policies, governing the professional’s way of conduct. And so, irrespective of a person’s level of IQ, they are able to develop social intelligence and invest wisely. Governments should also provide fair level grounds needed by these people in order to develop IQ scores which can be used to catapult the economy as a whole (Kaufman, 2009).

The government should ensure that the income index in the economy is fair and stable in order to assist people in making heavy investment decisions. It should also provide facilities that are related to education matters so that citizens, irrespective of their financial status can access basic education. These facets are considered to be the core-drivers of developing high IQ qualities within individuals.

To sum up, it is safe to assume that the aspect of IQ in investment decisions depends highly on the probability of a person’s ability to undertake risk investment decisions. They are also expected to learn such skills as social intelligence which can, in turn, help them distinguish between credible professionals and cheats. The aspect and applicability of IQ in making future decisions have been made possible with the recent innovations in the field of intelligence. Such fields as human genetic engineering and formulation of formidable investments Acts as the Dodd-Frank Act of 2010 have eased on the possibility of barricades experienced within the investment sector as a whole.