Trade what you know

July 22, 2015 09:00 AM

We analyzed the investing behavior of our network of 40,000 users and found that almost every industry is biased towards investing in itself. Examples:

  • Mad men buy more Facebook (FB) stock (advertisers are 1.6x more likely to own FB)
  • Finance professionals buy more bank stocks (1.4x more than average)
  • Doctors buy more healthcare (1.2x more)
  • Tech people buy more tech (1.14x more)

It turns out that people really do “Buy what they know.”

But love for your profession doesn’t mean equal love for all companies in your industry. Although advertisers are the biggest investors in Facebook, they avoid investing in rival Twitter. Doctors shower love on biotech leaders like Gilead Sciences (GILD) but shun Big Pharma companies like Pfizer (PFE). Makes you wonder, “Do they know something?”

Our conclusion? Your career highly affects your investing biases, for better or for worse.

About the Author

Hart Lambur is the co-founder of Openfolio.com, where investors share insights and ideas, and watch how others put them into action. Previously, Hart traded interest rate products at Goldman Sachs where he was also involved in the development of the firm’s electronic bond trading capabilities. 
@openfolio