Why a Website on Mindful Investing?
I started investing through my previous employer’s 401K plan in 1995, when my “investing style” pretty much consisted of ignoring my account and letting the money go into the default investment, which was the most conservative option possible. Only about five years later, when I had accumulated some non-401K savings, did I really start to consider how I should invest. During this time, the stock market was sky rocketing, and my assessment (along with many others at the time) was that even a chimp could pick stocks. Visions of doubling or tripling my money within a few years danced in my head. Of course, this turned out to be at the top of the dot-com bubble in the year 2000. The graph below shows the value of the S&P 500 index, which is generally representative of the volatile stock action from the mid-1990s to present. I sunk some serious cash into a technology mutual fund in early 2000, which proceeded to plummet a few months later.
Thus came the realization that this investing game was tricky and there was a real potential to simply burn up much of my savings by making the wrong choices. Over the next 15 years I became partner in a thriving consulting business, and with each passing year investing the money I was accumulating became more and more critical to my long-term financial success. Along the way, I tried many different investing philosophies and approaches, some of which worked out and some that did not. Through these hard lessons, I learned there is a lot of conflicting information out there in books and websites, and many (but not all) people providing advice are motivated by some type of self-interest. And sometimes it is very hard to tell what that self-interest might be. Being a scientist by training, I became interested, even obsessed, with trying to objectively distinguish the useful advice from the not so useful advice.
Over the last few years, I independently became interested in the western concept of “mindfulness”, which originates from some of the eastern ideas in Buddhist philosophy and other places that I won’t detail here. My original motivation for exploring mindfulness was personal. I thought it provided an avenue to being more happy and fulfilled in my life in general, and that turned out to be extraordinarily true in myriad ways that go beyond simple financial success and investing. Through this personal journey I realized that the concepts behind mindfulness offer useful concrete guidance on how to invest, manage your wealth, and retire successfully which are remarkably consistent with many of my science-based conclusions about investing. Moreover, the concept of mindfulness actually helped me debunk and refine some of my early investing ideas because they turned out to be less objective than I originally thought. Even further, mindfulness helped me realize that at least 50% of investing is about handling your emotions and avoiding making emotionally charged decisions. (Elsewhere in this website I explain why this is true and talk a great deal about the role of emotions in investing.) Mindfulness, it turns out, provides a crystal clear viewing screen for navigating these emotional decisions and investing more objectively and reasonably, which means investing with greater success and peace of mind.
What Does This Website Offer That’s New?
There are other websites and books out there on mindfulness and investing. I provide links to some of them in my more detailed articles on this website, because they definitely contain useful ideas that I spend less time on here. Overall, the existing information on mindfulness and investing tends to focus on how mindfulness can help you stay calm about your investments. Mindfulness can definitely give you a more objective view and reduce your stress levels, particularly when the markets are in turmoil and your account value is evaporating before your eyes. There is also extensive generic information about how mindfulness can help you make solid financial plans. However, I felt some key questions remain unanswered. For example, does mindfulness provide an overall investment philosophy? Does it help define specific investments that are good and bad? Does it imply specific actions to prepare for and implement your retirement? The answer to these questions, by the way, is undeniably, “yes”. The goal of this website is to use the concept of mindfulness to lead us to specific investment decisions.
If you web search for “mindful investing” or similar search terms, you will also find there is second meaning to this phrase that is widely used in some circles. This second meaning has more to do with the concept of “ethical investing” or “socially responsible investing”. This is a logical use of the term given that mindfulness originates from Buddhist philosophy, which addresses ethics and a person’s role in society and the world. To be clear, I have no argument with much of the ethics promoted under this concept, but this website is not really about ethical investing. An analogy may help to illustrate the specific difference between the two types of “mindful investing”. For example, Buddhist philosophy would arguably lead you to the conclusion that you should be a vegetarian, because it does less harm. (If you don’t find that statement self-evident, I encourage you to do some research on the impact of meat eating on society and the environment.) I am not going to tell you in this website what you “should” eat in terms of your investments because it’s ethically sound to do so. Rather, I will tell you how to use mindfulness to hunt, select, grow, gather, cultivate, store, and cook those investments. These methods are useful regardless of whether you choose to invest consistent with your own personal ethics or not. I am not here to judge anyone on that front.