For those of us on the path to FI, or financial independence, and especially for those of us who have pretty much automated all our savings, we are tasked with the tough to-do item of just sitting and waiting for compounding to do its thing. Perhaps patiently, or perhaps not so patiently.
We should be focusing on living our lives, living our best lives now, and letting our investments grow in the background. But as we all know, it can sometimes be difficult to watch our money go up and down on the roller coaster ride of the stock market.
If you are one of those people who have no problem with ignoring the stock market, who have nerves of steel and are able to watch their money go up and down, knowing that they are in it for the long haul (and especially that you only “lose” money when you actually sell during market downturns), good for you!
You can probably skip this post if you want to 😉
But for me, even though I let my money sit in the stock market and do its thing in the background, it’s still tough to “set it and forget it”. It’s still hard to watch my numbers go up and down, wondering if and when I’ll ever achieve that magical FIRE number (which, in its most basic form, is 25x yearly expenses).
When it was just me, back in my SINK (single income, no kids) days, this task was a little bit easier. What worked for me in the past, and what for the most part still works for me today, is that I don’t check to see what’s going on in the stock market or with my investment numbers every day.
But now, Mr. Dink is in the picture. He has a different outlook than me. He too has nerves of steel, and can leave his money to compound in the background without worry. But his nerves must be stronger than mine, because he actually likes to check in on the stock market every day.
It drives me crazy, and yet I love him. So, I had to set a boundary.
After months of quietly agonizing over hearing about the stock market every day, and letting it interfere with my precious inner peace, I eventually had to have a conversation with Mr. Dink about this habit of his. I had to tell him how I felt. That it was perfectly fine for him to check the stock market every day, I have no problem with that, but that I just needed him to not share what he learned with me every day.
The boundary was set. For the most part, with maybe just a few slips on Mr. Dink’s part (we’re all human after all), it’s worked out just fine. My inner peace has returned.
But this experience got me thinking about what I would do if it wasn’t so easy. Or what I would tell other folks who are in similar positions. Or who maybe don’t have spouses that give them anxiety, but that they themselves have a hard time not checking the stock market, or not worrying about the stock market, or not thinking about their money or the stock market.
One of the more important tasks of an investor, especially one in the FIRE space, is to get in the mindset that we are “in it for the long run.” We know we’re supposed to keep our emotions out of it, but it’s harder than it seems! This is our money, our future, our hopes and early retirement dreams we’re talking about!
Luckily, I learned about this necessity of riding the stock market waves early in my FIRE journey. One of my favorite FI bloggers, JL Collins, and the author of the book The Simple Path to Wealth (which describes the investing strategy I use), talks so often about “the wild ride.” How we have to be willing to not panic or sell when things are looking bleak. How “you gotta be tough.”
I always thought I was better at ignoring the stock market buzz because of him. And of course, I do credit him to a degree. I also credit his book for helping me rip the Bandaid off and start investing in the first place!
But lately, I’ve been thinking about another potential reason I’ve been able to ride the waves, to hang on so long and not sell or meddle with my investments: meditation.
I know it might sound a little woo-woo, but stick with me!
I started meditating, thanks to a wonderful therapist I had right around the same time I really got serious with my FI journey (also around the same time I got off the hamster wheel, took a paycut, and never looked back).
Meditation is all about practicing being in the present moment, and letting all your emotions just be. Feeling sad? It’s ok, lean into that. Feeling happy? Lean into that too. Feel all the feelings. Breathe through them. Don’t push them away, just let them in. Let them be, as long as you’re focusing on the breath.
Feeling all my emotions and at the same time just letting them be is what I’ve learned that meditation most helps with, and it’s also why I think that meditation has contributed to me being a “better investor” (aka being able to ride the waves) on my path to FI.
If investing on the FI journey is all about setting it and forgetting it (the simple path to wealth that’s not so simple for some) and not letting the emotions of riding the wave that is the stock market get to you, I think meditation can help.
And not only does it help by staying calm when the waters get rough, this practice of meditation has also helped me realize, be more in tune, when my feelings are feeling, well, off.
The story I told above, of telling Mr. Dink my feelings about him checking the stock market every day, is just one example. I wouldn’t have been able to articulate my boundary with him if I hadn’t taken the time to get in tune with my feelings of “uneasiness” and figure out where they were coming from. We as humans have a tendency to push away uncomfortable thoughts and feelings. But meditation teaches us to separate our thoughts from our feelings, and that it’s ok to feel everything we’re feeling.
Another example of this is how I started checking in on my progress toward FI quarterly instead of monthly. I noticed that I was feeling off (aka bad) whenever I checked in on my progress, which at the time I did monthly. After this happened for a few months in a row, I started to really contemplate why I was feeling the way I was. I noticed the feelings, and ruminated on them (in a good way). I realized I was restless because I wasn’t noticing much progress in my numbers, and it didn’t make me feel good.
So I experimented by starting to check my numbers quarterly. As difficult as it was to NOT check every month, the reward outweighed the difficulty. I’m much happier now when I check my numbers quarterly. That icky feeling I was feeling before is gone. So, experiment success!
Ok, ok, it’s all well and good that I think that meditation helps me be a better investor, but what does the research say?
I realized while writing this post that I might think that meditating helps us be better investors, but as a researcher at heart, I also wanted to know what the data showed.
So, my researcher self took to the internet, in hopes that I could back up my theory with some data.
For what it’s worth, here’s what I learned.
First, I want you to know that there are a LOT of hits when Googling mindfulness and investing. However, many of these hits are just click bait.
Also, I think it’s important to keep in mind that many researchers have said that the methodology behind meditation research needs to be improved.
I say this because I want you to know that the ideas below based on some articles I found on the internet are still just my own opinions based on my experience and my research.
From what I learned from the internet, I came up with 3 “official” reasons why meditation may help us be better investors, besides the obvious stress-reducing effects of meditating (because less stress is just better for everything, really).
Meditation is known to “reduce proneness to distraction”
Speaking of click bait, how many times have we seen an article with a doom and gloom headline, telling us that we’re entering a recession or claiming the article will show us how to “recession-proof” our finances? Distraction.
Even what Mr. Dink was doing, by letting me know every day how the stock market was doing, to me was a distraction. A distraction from my goals and values.
All that noise? All that media telling you to panic and sell?
Meditating may make you better at ignoring it.
Meditation increases trust and reduces risk aversion and competitiveness
I trust, because I’ve done my own research and know what my risk tolerance is, that my investing strategy is the right one for me. Meditation may help with this trust in my own strategy (and yours too).
I am a generally risk-averse person, but again the knowledge I’ve gained about personal finance and investing has allowed me to take risks in the stock market.
Meditation may help you be less risk averse.
When you’re in the game for the long haul, there is no room for competitiveness. If I wanted what others had, if I fell trap to comparing myself to others, I wouldn’t be on the path I am to financial independence (or it would be a lot harder).
I spend my money on what brings me joy, not on what brings others joy or what society tells me I should spend my money on.
Meditation may help you feel less competitive, less worried about comparison. Which in turn may help you save more and leave it for compounding to do it’s thing.
Meditation enhances “cognitive flexibility”
Cognitive flexibility is the human ability to adapt cognitive processing strategies to face new and unexpected conditions. In other words, it’s the ability of humans to be able to adapt to challenges, to the unknown, to surprises.
And, cognitive flexibility is intrinsically linked to attentional processes, meaning it takes effort and intention to be cognitively flexible, it doesn’t just happen automatically.
When we meditate, we are practicing being aware. We are practicing paying attention. Which helps build our cognitive flexibility.
And cognitive flexibility helps us adapt to the unexpected.
Market plunging? Net worth taking a dive? Cognitive flexibility may help us adapt to the roller coaster ride that is the stock market.
Closing thoughts
As I come to the end here, I have one additional thought.
Although I do truly believe that meditation can help us all be better investors, I also believe that all the benefits of meditation I’ve listed above help us be better adopters of financial independence in general.
As people who identify with the principles of FI, we already pay attention to our lives, to our own unique situations. Many of us think lifestyle design is just as important as reaching financial independence. We intentionally save and invest. And, we are flexible when things change: we can adjust our savings rate, our withdrawal rate, our plans, our goals. Because we have found the key. The key that opens the door to financial freedom. Spend less than you earn, and invest the rest. And we’re never going back.
What do you think? Can meditating help us be better investors? Have I convinced you to start meditating? Or, if you’re already a meditator, do you agree with my thoughts? Anything to add? I’ve love to hear from you!