Mindfulness is extremely relevant for investors! When investing, would you rather make decisions with a mind operating at peak performance, or when your mind is unfocused and wandering? By making more rational and informed choices, we can avoid potential feelings of regret.
Investing is associated with risk and returns, where volatility provides investors with the desired returns. Yet, this volatility naturally raises feelings of uncertainty in us. Humans have an innate fight-or-flight response in the face of threat or adversity. In a market that can fluctuate greatly, even slight downturns can cause fear to build up, urging us to take action and flee from potential losses. Volatility also brings stress, which cognitively makes us less likely to make informed decisions! During times of stress, we are more likely to seek fast solutions to alleviate this stress, rather than objectively appraising the situation and thinking of the best course of action. For example, we may be tempted to adopt panic-selling behaviour, where we sell away our investment positions at a high price because of our assumption of a downward trend. However, this is actually more damaging for our funds because we are contradicting the principle of investing — buying low and selling high.
With mindfulness, we allow ourselves to not only experience these negative emotions of fear and anxiety, but also accept and understand why we feel this way. When we take the time to internalise our natural evolutionary responses, we are better able to make rational decisions that do not sabotage our investment plans. We can build up resilience towards volatility and bolster our stress-management skills while in the market.