How to control your emotions when investing

How to control your emotions when investing

Controlling our thoughts and feelings is central to staying disciplined, long-term investors, and mindfulness may be one of the most effective tools for doing exactly that. Mindfulness is a state of mind created by focusing on the present moment while calmly acknowledging and accepting our feelings, thoughts and bodily sensations. For investors, that awareness can be the difference between a sound decision and a costly, emotionally driven mistake.

In this video, financial writer and adviser trainer George Kinder, who has practised mindfulness for more than 50 years, explains what mindfulness is and how it can help you control your emotions when investing. He describes it as a training in paying attention: to the present moment, and to who you are, including the moments of frustration, fear, anxiety and greed that every human being experiences. That practice makes you quicker, clearer and more alert when it matters most.

You'll learn why so many investors fall into the same damaging pattern. Rather than buying low and selling high, most people do the opposite, buying high when everyone is enthusiastic and selling low when everyone is pessimistic, driven by greed and fear. Mindfulness helps counter this by building patience, equanimity and calm, and reducing the reactivity that leads to poor decisions. George Kinder offers three recommendations: start a mindfulness practice if you don't have one, double your practice time if you do, and find a trustworthy adviser who can help settle you down and stop you making foolish mistakes.

The takeaway: mindfulness isn't for everyone, and although it looks easy, it takes real practice to develop. But for investors willing to put in the time, George Kinder says it is an investment you won't regret.

Chapters / Key points

• What mindfulness is and why it matters for investors
• George Kinder on mindfulness as a training in paying attention
• Why emotions so often get the better of investors
• The greed-and-fear cycle: buying high and selling low
• How mindfulness builds patience, calm and less reactivity
• Kinder's three recommendations for investors
• Why a trustworthy adviser helps you stay disciplined
• Why mindfulness takes practice, but is worth the effort

Transcript

How to control your emotions when investing

RP: The last few years have seen a big increase in the popularity of mindfulness. Mindfulness is a state of mind created by focusing on the present moment, while calmly acknowledging and accepting our feelings, thoughts, and bodily sensations.

George Kinder is a financial writer, and trains financial advisers. He has practised mindfulness for more than 50 years.

GK: So it's a training in paying attention. And you're paying attention in here. You're paying attention, in a way, to who you are. You're paying attention to these moments where you feel wonderful, these moments where you feel frustrated, these moments where you feel fearful or anxious or guilty or shameful, which we all have as human beings.

The primary practice that is taught in mindfulness is to really focus on the present moment, which, as you know, is impossible to do because it keeps disappearing on you. But what that does is it makes you much quicker in the moment, much clearer in the moment, much more capable at a moment's notice to focus and be present, so you're really much more alert.

RP: One of the mistakes investors commonly make is they allow their emotions to get the better of them. By making you more aware of your emotions, mindfulness can help you control them.

GK: The most common pattern in investing is not to buy low and sell high, which is the smartest thing to do. The most common pattern in investing is that we all buy high, when everybody's enthusiastic about something, and then we sell low when everybody's pessimistic about something. So what happens, that's driven by greed and fear. What mindfulness does is it creates more patience, more equanimity, more quietness, less reactivity. So you're more able to be here, be present.

My main recommendation would be to, if you aren't doing mindfulness, get a practice going. And if you are, I would double your practice time. And I think the third thing is find an adviser who's trustworthy, because they will help settle you down. They have listening skills inside of them, and they'll help settle you down so you don't make foolish mistakes.

RP: Mindfulness isn't for everyone. And although it looks easy, it actually isn't. It requires plenty of practice. But if you invest the time required to learn it, George Kinder says you won't regret it.