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A Mindful Investment Experience

Posted by Jim Kantowski, CFP®, CPA on August 12, 2020

A Mindful Investment Experience

I’ve been learning a lot in the last year about mindfulness and meditation, thanks to the recent popularity of apps such as Calm, Headspace, and Waking Up. If I’m being honest, I admit I was a reluctant participant at first. But the concepts have grown on me—and I’ve since discovered how mindfulness practice relates to investing.

Don’t worry, this blog post is not an attempt to convince you to meditate or to change your life. I would, however, like to share a few concepts that I believe can help improve the investment experience, which can sometimes be fraught with uncertainty. These concepts are not new and may actually be obvious to some, but for me it was a nice reminder and provided some perspective.

The Definition Of Mindfulness

Mindfulness is the basic human ability to be fully present, aware of where we are and what we’re doing, and not overly reactive or overwhelmed by what’s going on around us. (Read this article for a more in-depth discussion.)

Mindfulness is a quality that every human being already possesses. It’s not something you have to conjure up, you just have to learn how to access it. Mindfulness has nothing to do with religion or a specific culture or group; it is practiced by many different types of people with different backgrounds from all over the world.

Have you ever taken a moment of silence and tried to listen to what is happening inside your head? If you have, you may have realized that your mind is in constant thought. You are continuously reviewing the past and creating stories or scenarios about what may happen in the future. When you take a minute and act as an observer of your thoughts, you may recognize that you rarely think about the present and what is happening in the moment. Mindfulness is a skill that must be learned.

So how does this relate to investing?

If we take a look at how we view our investment experience, we are constantly looking back at the days and years past and reviewing what happened in the markets. What might have happened had we invested in a different way, or held different investments? Would we have done better or worse than we’re currently doing? We wonder why we didn’t sell the stock when it was up, and why we didn’t buy when the market was down. We are continually second-guessing ourselves about the choices we’ve made and asking ourselves why?

If we are not thinking about the past, we are busy looking into the future, wondering how different events will affect the performance of our investments. We are wondering what will happen in elections, what other countries are doing, what natural disasters might occur and how they will impact our investments, and anything else we can think of. We create worst-case scenario stories, and stories about stocks that cannot lose.

Often we make bad decisions based on fears we only imagine. We tie poor investment decisions in the past to decisions about the future, and anticipate outcomes that will likely never happen.

We often hear comments like:

  • “If we don’t sell we will lose everything.”
  • “I am not going to invest now because the market is going to plummet.”
  • “Every time I make an investment I lose money.”

These statements are often untrue and manufactured by our constantly thinking minds.

If we can just take a second and listen to our thoughts, we may discover that they are just that—thoughts—that will very likely never come to fruition.

Practicing mindfulness might lead you to recognize that you are feeling anxious about what’s going on in the world, and you are experiencing fear about worst-case scenarios. Remaining calm and in the present, and recognizing your fearful thoughts may prevent you from making mistakes in your investments.

You may be able to change the narrative and ask yourself better questions instead of reacting. Would now be a good time to review your overall strategy, and make sure you are in a good position to handle the current economic situation? Are you reacting out of fear? Asking these questions will help you maintain discipline and stick to a strategy that is likely right for you if you have taken the time to put it in place.

I have found that the following mindfulness concepts can relate to investing. These are in no way new concepts, and may already exist in our everyday life.

Non-reactivity

Non-reactivity is about allowing things to happen, feelings to occur, or thoughts to flow, without reacting to them in a negative or positive way. For instance, you may not like the results of an election; however, you may not want to make investment decisions simply based on your dislike for one candidate or another.

Imagine having the ability to not react to news, market volatility, and fear. This would save us from making crucial investing mistakes, like selling low when fear is at an all-time high or buying when euphoria exists. This would save us costs and taxes, which all take away from the long-term results.

Patience

Patience is something we all know, but don’t always practice! This takes a lot of work, and a willingness to slow down and let things happen.

If we can just sit back and let the markets do the work, knowing it will take time and discipline, we give ourselves a much better chance of having a positive investment experience.

Staying In The Moment

Staying in the moment is not easy to do. Our thoughts are often rehashing the past or worrying about the future. There is nothing we can do about either of these things, but they take a lot of energy and lead to the creation of scenarios that may not exist.

Rehashing past trades or mistakes is likely to lead to future investment mistakes. Thinking about the future and what might happen will lead us to anticipate events that are not likely to occur. Both reshaping past events and creating unlikely future scenarios—combined with a constant bombardment of negative news—may lead to poor investment decisions.

This Too Shall Pass

The world is constantly changing, along with our feelings and attitudes. If we can keep from reacting, maintain our patience, and stay in the moment, whatever is happening will likely pass before we know it.

Current events only last so long. Everything passes at some point, and the next big story breaks.

So the next time you find your mind racing about the past or creating worst-case scenarios about the future, take a minute—and a deep breath. Maybe, just maybe, it won’t turn out to be as bad as you expect.

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