In the world of professional investing, where margins are thin and milliseconds matter, any edge - no matter how unconventional – surely warrants a closer look. One such underexplored variable is your circadian rhythm.

 

New research suggests that the time of day you conduct your investment analysis or make key portfolio decisions could directly impact the quality of those decisions. If timing is everything in markets, why wouldn't it also apply when you think?

 

The chronotype factor: Morning Larks vs. Night Owls

 

Before we start, it’s important to remember that not all brains are wired the same. Some of us hit peak cognitive function before breakfast, while others find their rhythm only after the sun sets. This is known as your chronotype - your natural predisposition to be more alert and mentally agile at certain times of the day.

 

"Morning larks" tend to be most productive in the early hours. They're typically sharper, more focused, and make better strategic decisions before noon. In contrast, "night owls" often do their best thinking in the late afternoon or evening. Then there are the middle-ground "third birds", whose performance peaks somewhere between.

 

For investment professionals, understanding your chronotype isn’t just a lifestyle preference; it could be a risk management tool. Imagine the implications of a fund manager making asset allocation calls outside their optimal mental window. The decisions may still be rational but less rigorous, more prone to bias and potentially less anchored in long-term thinking.

 

Biological bias in financial decisions

 

A study from the University of Sydney highlighted how impactful this can be. Investors operating outside their circadian peak took more risks and made more errors. While the study stopped short of directly linking this to portfolio-level performance, the behavioural implications for investment quality are compelling.

 

However, it's not just about timing trades. Strategic reviews, risk assessments, and even fundamental research can suffer when performed during cognitive troughs. You wouldn't run performance attribution analysis using outdated data? So why run it with a foggy brain?

 

What this means for portfolio professionals

 

If high-frequency trading desks adjust for nanosecond lags and hedge funds model volatility around Fed announcements, surely the human decision-maker’s performance window deserves equal attention.

 

Here’s how institutional investors and advisors could apply this:

 

· Schedule key decisions for your peak hours: For larks, that might mean morning investment committee meetings. For owls, late-afternoon model reviews may yield better insight.

· Know your team’s chronotypes: A blend of early and late risers can create decision imbalance if not managed. Align review cycles with group peak cognitive zones.

· Apply to client meetings too: Investors are more impulsive during cognitive dips. Engaging during their peak hours could lead to clearer, more collaborative outcomes.

 

Conclusion: Don’t just time the market, time yourself

 

Investing is often framed as an external game - data, prices, signals, sentiment - but the internal game is just as real. In a world where reaction time, clarity of thought, and sound judgment are paramount, your circadian rhythm may be the quiet force shaping outcomes.

 

In short, alpha doesn’t just live in algorithms or macro calls; it might also lie in the clock on your desk. If you’re not factoring in when you think, research, or decide, you may already be playing with one hand tied behind your back.

 

Timing isn’t just about the market; it's also about you!

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