Mindfulness Investing — How to Stay Calm and Collected During Market Volatility

Investment is driven by emotions

We are often hijacked by fear (fear of losing money and fear of missing out on profits and great investment opportunities) and we make irrational financial decisions such as selling when the market falls and buying when the market is over-heated.

Ever since I started learning yoga, I tried to apply the philosophy and principles of yoga into my daily life. And money is definitely an essential part of life.

Volatility is the nature of the stock market. And every day it goes up and down and up and down — sometimes very vigorously that causes emotional challenges for people who put money into it.

“Buy low and sell high”, “Be greedy when everyone is afraid and be afraid when everyone else is greedy” — we are all familiar with these. The problem is it is easier said than done.

When the market is falling — 2007–2009 financial crisis, 2019–2020 Coronavirus causing the stock market to drop more than 3,000 and when all the figures are red, do you dare to put your money in at that time?

When the market is rising — 2016–2019 everyone is telling you how much they have earned in the stock market and how they are earning 12–15% or even more in a year, don’t you want a part of that profit?

We have to accept our feelings. Human emotions are natural, but it doesn’t work well for our financial decisions.

What we can do is to detach our feelings with financial decisions — and this brings us to “Mindfulness investing”.

Mindfulness

What is mindfulness?

Meditation has its origins over 2,500 years ago (it is nothing new).

Mindfulness was originally studied in Buddhist and yogi. It is not religion but a tool used in religious study. In 1979, mindfulness began to be used in therapy for stress reduction and treating depression, anxiety, eating disorders, addiction etc.

The term “mindfulness” has gained popularity in the last decade because of increasing stress and anxiety across the globe. Simply put, mindfulness means deliberately and consciously engaging in an activity without judgment.

Many times, we perform activities without full attention and consciousness.

For example, we breath without paying attention to our breathe.

We brush our teeth without paying attention or thinking about it.

We walk to and from office without thinking about the way because we are too familiar and we perform it every day that we do not need to think or pay attention to it.

Day after day, our life follows pretty much the same patterns and we have developed certain habits to help us divert our attention and conscious to outside of what we are doing.

For example, when we are showering, we could be thinking about work.

When we are eating, we could be tracking the stock market and thinking about whether to buy or sell.

Our not paying full attention at the things that we are doing can affect not only relationship, work quality, but also investment decisions.

Benefits of Mindfulness for Investing

Medical reports and studies have shown that mindfulness helps us to stay in the course, to stay calm during difficult experiences, to cope with difficult emotions, to be less receptive to stress, and to have more control of chaotic situations.

Participants of mindfulness therapeutic program also reflected that they learn that they have more control over their responses even if they can’t control the events themselves.

Isn’t that exactly what we want when we invest?

Despite short-term volatility, historically the stock market has performed at a 8–10% return over long term. What causes the losses are people buying and selling at the wrong timings.

If you are like Warren Buffett (he holds his stocks forever — definitely more than 10 years), you can reap the benefit of the long term growth of the stock market as well.

The thing is we often sell when the market falls because of fear. And we buy when the market rises because of false confidence and fear of missing out. That is what causes the loss.

If we can be mindful — we can learn to have more control over our responses to the stock market even if we cannot control the volatility itself, we can ride the wave and keep the balance until the storm is over and the sun comes out again.

If we exercise more mindfulness in investment, we can better handle the stress and emotions that comes with it and have more control over our responses to the fluctuations by seeing a broader and long term perspective.

How to exercise mindfulness

There are a few ways I use to practice mindfulness:

Avoid multi-tasking

It’s hard but I try to avoid multi-tasking now. When I caught myself not paying attention to what I am doing, I draw my attention and consciousness back.

This practice helps us to have more control over our attention and consciousness.

2. Focus on breath

If I am in a quiet place where I know I would not be interrupted, I would put away my smartphone and get rid of any distractions to focus on counting my breath for 1–3 minutes.

Inhale — one, two, three, four, five

Exhale — one, two, three, four, five, six

Making the exhale longer than the inhale helps calm the mind and body.

3. Lengthen reaction time

When I found myself reacting in the heat of the moment or under stress, I hit the pause button.

Pause… and that allows me to have a moment to recognise that I was hijacked by my emotion in my responses and reactions. So I either do the breathing exercises for 1 minute or I put it aside and come back to it when I am not controlled by emotions.

By increasing my reaction time, the real and right path to react can reveal itself.

Note: this is not investment advice. I’m not financial planning professional. Just sharing what is working for me as part of my investing strategy or what I have learned on my investment journey. Please be reminded to do your own research and consider your own circumstances before making any financial decisions. You could also check with your financial professional to understand what would be best for your situation.