How Meditation Can Make You a Better Investor

I've been to six cities in the past two weeks...

I flew into New York City, then spent two days in Baltimore, two days in New Hampshire, one day in Boston, three days in Washington D.C., and at the end of the week, I took a flight to Tokyo. Then I flew back to Manila for several internal training programs and finance events. In a few days, I will fly back to Istanbul. 

The world has begun to open. I haven't had a schedule like that since early 2020. 

When you're this busy, it can be easy to forget to take care of yourself. You don't eat quite as well, and you don't get as much sleep or exercise. Your most foundational needs often get pushed to the side. Yet these are the most important aspects of success, especially when we understand that true wealth is health. 

This reminds me of three incredibly busy and incredibly successful investors: Ray Dalio of Bridgewater Associates, Paul Tudor Jones II of Tudor Investment, and Michael Novogratz of Fortress Investment. 

What do these three investors have in common, other than the fact they're all incredibly wealthy as super successful investors? 

They're all avid meditators. Despite their busy schedules, meditating is a top priority, with Dalio saying he meditates for 40 minutes each day. 

Forty minutes may seem long, but don't let it scare you. Even just two minutes per day has been shown to reap benefits. 

I aim to do 15 to 20 minutes per day, yet sometimes end up doing just two to three minutes. Still, that's better than nothing. 

Meditation improves investing... 

While many finance professionals have quite busy schedules, carving out some time each day to meditate ultimately saves time because it leaves you more focused and efficient. 

The Chartered Financial Analysts Society ("CFA Society") conducted a survey of finance professionals, and almost 60% of respondents said they wanted the CFA Society to create a meditation program. 

Can you imagine that? Members of the most prominent global association of investment professionals asked the CFA Society for meditation guidance. It's almost surreal. 

Mediation helps investors by reducing cognitive biases that thwart us from staying on a good investing path or framework. 

One such bias is the sunk-cost bias. It causes these investors to stick to losing trades for longer periods, not because of the opportunity but because of the lost money to date. That's a recipe for losing. 

The time, energy, or money people invest into a project keeps them at it even as it fails, instead of cutting their losses and moving on to a new and more promising project or investment. 

We're all prone to cognitive biases, which can be very difficult to get rid of. We can be familiar with cognitive biases all we want, but that doesn't mean we are above them. 

As renowned psychologist Daniel Kahneman at the 65th CFA Institute Annual Conference in 2012 said, "Knowing the errors is not the recipe to avoiding them." 

Meditation has been shown in study after study, from government health programs to athletes of every sport. In one study, participants who undertook guided meditation demonstrated less sunk-cost bias at a 78% success rate when compared with participants who were instructed to spend the same amount of time just with their minds wandering at just 44%. 

Knowing when to "cut your losses" can make a huge difference for investors. If a stock is down 50% from the time you added it to your portfolio, it now needs to double just to get back to your entry price. 

If you hold onto a loser, you may also be missing out on the opportunity to put money toward a stronger investment. If you can reduce the chance of holding onto a losing bet by 30%, you should do it. 

So, how do you begin meditating productively?

I spent four days at an ashram in India, learning more advanced meditation techniques. I can say that it was a great experience. At the same time, you don't need to do the same, and it's not necessary to invest a lot of time to get started. 

I've read hundreds of studies on meditation and its variations, received extensive training from gurus, seen more instructional videos than I can count, and have practiced for years. 

Please allow me to share how you can benefit from meditation briefly. As a practice, it really requires no other background... 

For just two to three minutes daily, sit quietly with your eyes closed. 

Breathe calmly and deeply. 

Concentrate on your breathing. 

Work that up to 15 to 20 minutes when you feel comfortable, and go right back to just two to three minutes, or anything in between, if at any time you think it's just too long... 

That's it. No joke. 

From the Mayo Clinic to Harvard Health to sport after sport after sport, that simple activity can supercharge, literally, everything you do in life. You can reap incredible benefits with such a simple, powerful tool. 

Love, joy, and peace, as always,

Joel Litman
April 8, 2022 

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