Meditation and Mindfulness for Better

Stock Investing
When someone mentions meditation, you could be tempted to think of Buddhist monks in their
silent retreats meditating all day long... but the truth is, you don’t need to be a spiritual person to
meditate. Anyone can meditate, any place, any time. Meditation is not just for religious people --
it’s a practical way to train your mind to achieve the results you desire. For this reason, a
growing number of investors and stock traders are turning to meditation and mindfulness to
uplevel their skills.

Meditation and mindfulness improve stock investors' performance by:

· enabling them to take control of their cognitive biases when investing
· helping them manage emotions such as greed, fear, worry and panic
· giving them the tools to differentiate between the past, present and future, which in a busy
mind of a stock investor can all too often get jumbled up
· helping them make better decisions from present-centred awareness
· improving their metacognition and decision making skills.

Meditation and mindfulness do more than simply calm the mind of a busy investor. Their
benefits are so tremendous that you will be asking yourself, "why haven't I started meditating
already?", and if you have started this practice, you will be telling yourself that you should
definitely do it more often.

Meditation and Mindfulness Improve Investors’

Decision Making Skills
Our judgments are often clouded by faulty reasoning, gaps in memory and attention. Human
brain is a biased and limited resource. It can often fall prey to cognitive biases, i.e. systematic
errors in thinking and interpreting the information we have available. These errors in thinking
make us susceptible to erroneous assumptions and affect our decision making abilities. This is
costly when the decisions you make are related to stock investing.

The term cognitive bias was first introduced by behavioural economists Amos Tversky and
Daniel Kahneman in 1973, who won the Nobel Prize for it. Since then, behavioural economists
worldwide have devoted a great deal of time and energy to studying them.

Despite that, a survey done in 2014 by CFA Institute Financial NewsBrief has shown that 56%
of respondents have not managed to successfully implement behavioral finance principles in
their business. Behavioral finance is defined as the study of how irrational behavior affects
market prices. Irrational behavior in stock trading comes up when investors stray away from
rational thinking and become susceptible to unnecessary risks.

We are all prone to cognitive biases. They are very difficult to get rid of. We can be familiar with
cognitive biases all we want; it still doesn't mean we are above them. As Kahneman explained
at the 65th CFA Institute Annual Conference, "Knowing the errors is not the recipe to avoiding
them."

One such bias so important for stock traders is the sunk-cost bias -- the tendency to stick with a
losing project just because of the time, energy or money we invested in it in the past. Instead of
cutting our losses, and moving on to a new and promising project, we keep at it and we continue
losing money. One study done by Andrew Hafenbrack of INSEAD in Singapore showed that a
short 15 minute mindfulness meditation enabled participants to deal with this bias better. The
researchers reasoned that our wandering minds dwell too much on the past, thus enforcing this
bias. By practicing mindfulness, we are anchored in the present, not in the past, and can
thereby obtain a clearer picture of what is no longer serving us and sever those ties.

It is certain that allocating time for practicing mindfulness for 15 minutes before engaging in
investing will keep our minds more open to the present facts instead of being biased by the past
events. By focusing on the present, we are more likely to think and act more attentively and not
make our business decisions based on autopilot and previously created connections that might
not apply to the tasks at hand.
Another bias that mindfulness and meditation can reduce is implicit bias, a bias based on
automatic associations which influences our behaviour more than we know. Examples of such
bias are ageism and racism. In one study a group that listened to a 10 minute mindfulness
exercise showed less bias towards age and skin color than the group who didn't.

Another study showed that the brains of those participants who practiced mindfulness
meditation showed less stimulation when seeking rewards. This enabled these participants to
keep their cool and not allow the monetary reward chasing to affect their well-being and
performance.

As the research on meditation, mindfulness and stock trading goes on, I am sure we will
uncover that many more cognitive biases, so crucial when investing, can be counteracted by a
daily dose of mindfulness and meditation.
Mindfulness and Meditation Help Investors Develop
Trading Discipline and Control Emotions
Mindfulness and meditation are useful to stock traders because they increase their trading
discipline. Investors with higher trading discipline plan their steps and strategies and follow them
strictly. They are aware of how much risk they should take and invest in their portfolios
accordingly. They do not let their emotions affect their investing decisions.

Being a good investor does not just involve having the skills and knowledge necessary but also
having a strong trading discipline and being resilient to uncontrolled emotions that can interfere
with rational thinking. Uncontrolled emotions are known to affect traders to change their well-
planned steps and lead them to make losing trades.

<a href='https://www.freepik.com/vectors/business'>Business vector created by freepik -

www.freepik.com</a>

Investors' irrational behaviors in the stock market come from listening to their emotions too
much. Such emotions that cloud investors' judgment are fear, greed, confidence, and hope.
Greed, for example, which is a desire to have something we don't, can influence investors to
pay less attention to investment risks. Fear, on the other hand, may cause them to become
afraid of the drop in stock prices and influence them to panic sell. For example, volatility in the
change of stock prices may lead some investors to experience stress, which can influence their
decision making skills. Impulsive behaviours that are associated with a lack of trading discipline
and listening to emotions too much are panic selling and overreaction to news.

Panic selling is the tendency to sell stocks as a reaction to emotions such as fear instead of
basing their decisions on rational judgment. If there is a falling of a stock price, to the investor
holding the stock this serves as information that a group of investors has been selling out the
stock. If the investor becomes afraid of the price decrease and decides to sell out his stocks
simply because other people are selling it and not because of any valid arguments, then they
are exhibiting panic selling. On the other hand, if the investor decides to keep their cool in spite
of the momentary drop in the stock prices, and keeps following their previously planned trading
strategies, then they are following rational thinking.

Overreaction to news happens when overconfident investors overreact to the information they
own. Let's take an example of an investor who already invested on the market based on the
information he previously possessed. If it happens that he then receives news that support his
previously held beliefs about the stocks, he might be tempted to overinvest. This happens when
investors have lower trading discipline and consequently, let overconfidence guide their
investment plan.
If the investor allows emotions to affect their trading plan, he will sell his stocks sooner although
the drop in stock prices might be due to temporary volatility. By nurturing trading discipline,
investors will follow the steps they had previously planned and will not let emotions affect the
execution of these steps. Trading discipline has been proven to lead to success in trading
performance because it aids in diminishing irrational behaviours.

Mindfulness meditation helps induce mental clarity and emotional stability. It has been proven to
enhance trading discipline because it trains people to nurture self-discipline by teaching them to
observe their thoughts and emotions with acceptance and without judgment. This leads to
greater self-awareness and self-regulated behaviour. By being trained to observe their thoughts
and behaviours, investors are less likely to yield to impulse and disregard their trading
strategies. Furthermore, investors who are trained to be conscious of internal and external
factors without judgment and bias will not succumb to irrational conclusions and cognitive
biases in trading.

Numerous studies have demonstrated that practicing meditation and mindfulness lower anxiety,
stress and mood instability. Even short-term meditation training has been successful in lowering
depression, fatigue and anger. Also, those who practiced mindfulness meditation regularly had
higher emotional intelligence and developed a strong belief that they can tackle any task at
hand.

Meditation and Mindfulness Increase Investors’

Metacognition and Present Moment Awareness
An important trait for investors to develop is metacognition, which is the awareness of what we
know and don't know. It enables us to see the world as it is instead of what we would like it to
be. This is an imperative skill to hone when working with risks and uncertainty because
metacognition is in charge of our rational decision making skills.

Meditation and mindfulness aid us in separating the noise and the things which haven't
happened from what is actually going on on the market. Those investors who practice
meditation report that their perception of the present moment and present facts has improved.
Instead of reacting from a place of fear about the past losses or worry about the future gains,
they respond from present-centered awareness. Their reflection skills are also better. Their
cognitive processing skills are enhanced, and they are able to filter information better.
<a href='https://www.freepik.com/photos/man'>Man photo created by KamranAydinov -
www.freepik.com</a>

Famous Investors Who Meditate

You'd be surprised to hear how many illustrious investors have turned to meditation to boost
their performance. Ray Dalio, the founder of Bridgewater Associates, the largest hedge fund in
the world, attributes his success to transcendental meditation. He claims that it helps him slow
down, even amid chaos, so that he is able to make better decisions. Thanks to transcendental
meditation, he thinks more clearly and creatively. He also made it available to all of his
employees.

Other organizations followed in a similar vein. The CFA Institute, a global association of
investment professionals, developed a meditation program for its members. The Wall Street firm
Goldman Sachs Group Inc. also has a meditation program for its staff and so do BlackRock and
Deutsche Bank. Also, several major business schools promote meditation to their students,
some of which are Georgetown, New York University and Oxford.

Jason Apollo Voss, CEO of Active Investment Management Consulting stated that meditation
his decision making skills. Instead of having his thoughts and decisions on autopilot like most
people do, thanks to meditation, he can assess the quality of his own thinking better
(metacognition), which is highly important for investors because they need to be unprejudiced
and objective. After practicing meditation regularly he is now able to see patterns in data and
make connections in just a few hours as opposed to the hundreds of hours it previously took
him. Voss added that regular meditation slows down one's reaction to critical events, such as a
plummet of stock prices, so that we don't resort to panic but instead think things through.

Conclusion
Investing companies are constantly searching for ways to upgrade their performance -- some
turn to machine learning, others take on larger research teams, while quite a few have turned to
meditation as the solution. Mindfulness and meditation bring calm even during major crises,
such as losing all your money during a stock market plunge. They help us think clearly and
wisely. Thanks to mindfulness and meditation, investors can cut through the noise and make
rational decisions based on present moment facts and not on fear, greed, anxiety or stress.
Investors who meditate report that they have better metacognitive skills, are more creative and
less biased in their decision making.