Mindful Investing

Articles about the benefits of meditation are everywhere these days, and for good reason. 2020 and 2021 were unusually stressful years, and people are looking for non-addictive, healthy ways to manage their stress and anxiety. Thus why I got interested in mindful investing.

While meditation has been practiced for centuries (primarily by practitioners of various religions), it has surged in popularity recently and is now routinely being practiced by celebrities, schoolchildren, office workers and even the military. Reams of scientific studies have shown that meditation is extremely effective at relieving stress and anxiety, lowering both inflammation and cortisol levels in the body. In fact, meditation (and specifically the practice of mindfulness) has become so mainstream that the CFA Institute now offers a “Meditation Guide for Investment Professionals” to all CFA charterholders as part of their continuing education.

I began my own investigation of mindful investing a little over three years ago when I was looking for a way to manage my increasing stress levels. While I am by no means an expert, I have picked up some useful insights via the practice and study of mindfulness meditation, and it is clear to me that some of these techniques would be useful when navigating the emotionally-charged and behaviorally-biased world of investing.

If you are under the impression that investing is a rational, analytical, fact-based science, you would only be partially correct.

While we endeavor to approach investing in this way, we are still human and as such, prone to behavioral biases. In fact, the academic discipline of behavioral finance was created to study and name our irrational impulses: hindsight bias, confirmation bias, overconfidence, herding and loss aversion, to name a few. Without going into exhaustive detail, suffice it to say that when it comes to investing, our emotions often turn us into our own worst enemy, causing us to make decisions that fly in the face of an otherwise rational investment discipline. For exhaustive detail, you can watch Parsec CEO Rick Manske’s 90-minute webinar “Planning for Uncertainty, Acknowledging Your Biases and Building Emotional Intelligence.

When you engage in the practice of mindfulness meditation, you focus not on shutting out thoughts (a common misconception) but on becoming aware of your thoughts. Our internal dialogue creates a narrative of which we are generally unaware, which may lead us to take actions that are detrimental to our success and happiness. Thoughts borne of fear and anxiety can be very powerful in this way, until you recognize them for what they are: merely creations of the mind.

For most people, investing is fraught with emotion.

You are putting your hard-earned money at risk to suffer the whims of the market, with the hope of attaining a long-term goal (education, retirement, charitable giving, etc.). It is tempting to give in to anxious thoughts in the face of uncertainty and make sudden changes to your portfolio that undermine these goals, causing you to sell low, buy high and otherwise jeopardize the outcome. If you cultivate awareness of these thoughts and tendencies, however, you have a better chance of recognizing them for what they are and resisting the urge to give in to them. That is mindful investing.

While it seems like everyone is touting mindfulness these days, there appears to be real scientific support for its benefits. Even if you don’t undertake a formal meditation practice, a concerted effort to recognize deleterious tendencies could go a long way to improving your investment outcome and your peace of mind.

Sarah DerGarabedianSarah DerGarabedian, CFA
Director of Investment Management

Share:

Share on facebook
Share on linkedin
Share on email
Share on print

Recent Posts:

find an office

There Is Risk Everywhere – Keep Calm and Carry On

The events of the past two years should serve as good reminder to all of us that no matter what you do every day, we face risks beyond our control. However small the risk may be there is no way to ensure that you avoid falling victim to these types of events. Not that we should live our lives in constant fear – we should just prepare for the worst and then feel very fortunate should we end up living long and healthy lives.

Anything’s Possible

Parsec’s Sarah DerGarabedian explains how portfolio diversification helps protect against limitations of our narratives’ predictive capacities.

Recent Quarterly Newsletters:

Leaving a Legacy Edition

Read our Q4 2021 newsletter on leaving a legacy via strategic estate planning. We provide 10 articles with guidance on if you need an estate plan; types, features and taxation of trusts; how to set up trust funds for (grand)children; how to talk to your children about your estate; small-business transfer strategies; estate planning for the nontraditional family; how property titling can affect your estate plan. We also discuss what to do with your estate plan after getting a divorce or losing a loved one. We also introduce a new strategic alliance we formed with First Covenant Trust to offer our clients a full range of trust solutions.

Retirement Readiness Edition

If you are getting close to retirement age, this newsletter is for you. Parsec CEO Rick Manske explains how to save for education expenses in the face of retirement planning. Michael Baughman provides a 5-year countdown checklist, and Travis Boyer explains how to adjust your portfolio allocation ahead of retirement alongside a portfolio spending illustration. Nancy Blackman outlines eight steps to take ahead of retirement and Cristy Freeman suggests making a bucket list. Larry Harris writes about his experience turning 65 and Neal Nolan ponders what the day after retirement might feel like. We announce our 2021 Parsec Prize recipients and other company news. Enjoy!

Recent Whitepapers:

Stay Up To Date With Parsec

Sign up to join our mailing list and receive quarterly newsletters, whitepapers, news, and more right in your inbox.
Scroll to Top

Not a Client But want to receive updates?

Please sign up to join our mailing list and receive our latest news, thought leadership content and invitations to upcoming webinars.