Robin writes:
I've been practising mindfulness since the Covid-19 pandemic. I'll be honest, I struggled with it at first, and there were times when I felt like giving up. But then, about two years, it all began to make sense, and now I try to meditate every day. I still have a long way to go, but I generally feel calmer and more self-aware, and I'm much less likely inclined to dwell on negative thoughts.
The experience got me wondering about whether a mindful approach can help us achieve better investment outcomes and a greater sense of financial wellbeing. Then I heard about a new book called Mindful Investing by JONATHAN DeYOE, a financial planner based in Berkeley, California. The book so intrigued me that I invited Jonathan to be a guest on The Investing Show.
Jonathan and I had a fascinating discussion, and, whether you're a mindfulness fan or sceptic, I'm sure you'll find it instructive.
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TRANSCSRIPT
Please note, this transcript has been slightly edited for brevity and clarity.
Robin Powell: Welcome to The Investing Show. Mindfulness has grown hugely in popularity in recent years. More and more people around the world are discovering that focusing their attention on the present moment in a non-judgemental manner is a useful tool for stress reduction and for improving mental health and general wellbeing. But can it also help people to achieve better investment outcomes? Well, someone who certainly believes it can is Jonathan DeYoe, our latest guest. Jonathan is an evidence-based financial planner and the author of a new book called Mindful Investing.
Jonathan DeYoe: I’ve been worried for about 15 years about combining mindfulness and money because I was afraid, and I think rightfully so, that the industry would judge me as squishy.
Like, what is this mindfulness stuff? It doesn’t really apply. But really, when you think about what mindfulness is, it’s the non-judgmental awareness of the present moment, as we experience it through our senses and through our headspace, through our minds, right? Thoughts and feelings. And that non-judgmental approach turns out to be really, really, really important when you’re dealing with anything emotional.
And all you have to do is open one paper or one magazine to see how emotional money is. Money, the idea of not enough money, the idea of, I’m not happy with money, the idea of all of our lives being focused on contingent happiness… If only I had a raise, if only I had a better job, if only I had a better partner, if only, if only, if only, I would be happy.
It turns out that’s not how happiness works. And if you’re more mindful of it, you can be happier, you can have better wellbeing, but actually you can have better financial outcomes as well. The evidence-based path of investing that you’ve been promoting for a decade, 15 years, or as long as I’ve been reading you, Robin, requires us to basically sit still when it’s uncomfortable.
How do we sit still when it’s uncomfortable? Well, we’d better be mindful. That’s the only way we’re going to be able to shut that out. Or turn the volume of the emotion down to allow us to sit still when it’s uncomfortable.
Robin Powell: For Jonathan DeYoe, mindfulness has always been of benefit to investors. But he says it’s especially true now.
Why? Because of all the unhelpful information that investors are bombarded with every day.
Jonathan DeYoe: More today than, say, 15 or 20 years ago, there’s an enormous volume of stuff that’s coming at us. And it comes through media, through social media, through conversations, through Zoom calls… There’s just so much information coming at us and we are, and this is how this is how our brains work, right?
We are judging that information. This is the confirmation bias that we were all very well aware of, right? The information comes to me, and my brain, before I think about it, my brain says, Oh yeah, we like this information. It agrees with our previously held beliefs. We’ll let that information in.
But if the information comes to us and our brain goes, Oh, we don’t like this information, we don’t agree with this, it doesn’t agree with our previously held beliefs, then we don’t let that information in. So we, our brains, confirm what we already think. That’s a judgement. And that process of judgement goes on constantly.
So it’s this idea of being aware and being open and questioning. You have to actually be mindful. There are a lot of different elements to it. And so yes, non-judgment of self, but also being more open to outside information. Just look at the political environment anywhere right now. It’s just so polarised because one set of people in any country is just totally opposed to another set of people, to the point we’re calling each other evil rather than saying, I wonder why they experience these beliefs so deeply, which would be so much more beneficial.
Robin Powell: Another benefit of mindfulness, says Jonathan, is that it can help you to understand yourself better. That’s a critical part, not just of investing, but financial planning in general.
Jonathan DeYoe: In the West, especially, we never sit with quiet. We never just sit and listen to what goes on inside our head. And by listening to what goes on inside our head, we can begin to understand how thoughts arise out of nothing, and how we choose to attend to that thought. What sort of flavour we bring to that attention. Is it a flavour of, I want that, I want to pull it towards me? Or I don’t want that, I want to push it away from me? Then you can see that thought fade away. And if you watch that whole series of thoughts, you get to know yourself very, very well.
But, in personal finance, that’s not enough. To apply mindfulness to personal finance, you actually have to enquire as to what’s important to you in terms of values, in terms of what you should be spending money on. What does your authentic lifestyle look like?
To go back to social media, I don’t mean to say that social media is evil, but it gives us a lot of messages. We have to filter. If you’re just on Facebook for a minute and a half, you’ll have 14 different ads and you’ll have 27 people telling you how great their lives are and you will feel the pull to follow what they say and what they do. If you’ve never done the work internally to think about what’s important to me — What do I value? What’s my purpose? What do I want out of life? — then you’re just going to get pulled left and right in every direction. And so mindfulness allows you to come back, having done the work, to come back to what’s important to you and not get pulled in all those directions.
Robin Powell: If there’s one thing investors and the financial markets don’t like it’s uncertainty. But, as Jonathan rightly points out in his book, there will always be uncertainty. In fact, there wouldn’t be an equity premium if things were any other way. The key, says Jonathan, is to embrace uncertainty and to ride out any volatility it may cause.
Jonathan DeYoe: We have to recognise that there’s always this sense of the gathering darkness. There’s always this sense that something is wrong in the world and and and you can always find evidence to prove you right that there is something wrong in the world. And right now you’ve got that evidence with the wars, you’ve got the evidence with the Fed and possible recession. But you don’t have to go back far to find the last series of things that were wrong… and then before that, the last series of things that are wrong.
The human mind does this beautiful thing. We automatically filter out the negative things in the past and we forget all the crap we’ve been through, because if we didn’t forget it, we couldn’t get out of bed in the morning. So the brain does this automatic flushing of history.
It also, because it does that, gives us a false sense that we are moving from uncertainty to certainty, and that’s not what we’re doing. We’re moving from uncertainty to uncertainty, to uncertainty, to uncertainty, to uncertainty. And if we recognise that, if we’re mindful of that, if we remember, if we have an adult memory at all, and we remember that, yes, we were uncertain six months ago for a different reason and six months before that for a different reason. So we don’t have to get bent out of shape by the thing that’s happening today that we’re uncertain about behind all the uncertainty. And this is the beauty, the absolute beauty, of US equities or global equities. Companies do two things: they innovate and they protect capital. No one else does this. There is no other structure on the planet that focuses all their energy on innovation and protecting capital. Every company on earth tries to do this. Some are more successful than others. You can’t have any guarantee that one company is going to do better than another company. That’s not what we’re talking about. The structure innovates and protects capital. So when you put money to work in those places, while the noise is happening, they are working to innovate and protect your capital.
I mean, we don’t do this for a white-knuckle ride. We’re not doing this because we love the fact the markets go up and down. That’s what gives us the opportunity.
Robin Powell: Abraham, some people, like me, find mindfulness helpful. Others think it’s a waste of time. What’s your view? And do you practise mindfulness yourself?
Abraham Okusanya: No, I don’t, is the answer. And I have to admit, Robin, I have to scratch my head a little bit about this. My first impression was, I don’t see that mindfulness has got very much to do with investing. As I listened to Jonathan, it occurred to me that in the end this is just about getting people to focus on their values, what’s important to them, and especially trying to do that during extreme market conditions. If that stops people from panicking and over-trading or taking any sort of actions that damage their investment outcome, that’s a good thing.
Robin Powell: Well, if mindfulness gets you in that zone, be my guest. As Jonathan says, there’s so much unhelpful information out there nowadays, particularly on social media. What advice would you give to people who are particularly affected by all the noise surrounding investing in the markets and might be tempted to act irrationally?
Abraham Okusanya: Always focus on the basic principle of investing, and that is that you are investing in companies around the world who are making goods and services that make our lives better. And ultimately your return is tied to the fortunes of those companies, not the noise. And always remember that nobody knows the future and nobody can predict the returns of these companies. What we do know is that over the longer term, these companies deliver good returns.
Robin Powell: Now, Jonathan DeYoe is an example of a modern financial planner for whom financial well being is just part of a much bigger picture. Do you approve of the way that advisers are increasingly interested in clients’ general well being, or does that concern you?
Abraham Okusanya: I am totally in support of advisers focusing on the client’s overall wellbeing — on what the money is for. I think that is important. It’s foundational. And so for some people, mindfulness will be the door to get them into actually focusing on their own wellbeing and, and what they’re trying to achieve with their finances. I think that’s a very positive development.
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