Mindful Investing

One of the major benefits of Mindfulness is in the field of investing. Good Equity market investment
has been a major hurdle for many investors. People tend to purchase stocks at the top and then sell at the bottom.

This is the exact opposite of the rational behavior that needs to be followed for maximum profits. This behavior of I should not miss the party gives exactly the opposite results. The euphoria that the bull markets generates sucks in people at exactly the wrong time.

Investors should purchase the stocks when the markets are down in dumps and sell the stocks when the markets go up. This is rational behavior. Surprisingly it’s so very difficult for us to follow in real life. Irrational exuberance leads to very high stock prices leading to bull markets.
 former American fed chairman Alan Greenspan coined the term irrational exuberance to bull markets going up. Right now the US and most of the markets including India are in the grip of a bull market. Investors in such situations throw caution to the winds and jump in markets as if there is no tomorrow.

This happens because human behavior follows the herd mentality. Human beings are irrational most of the times. Everyone knows that it is dangerous to use cellphones while driving. but everyday one can see people talking on the phone while driving cars and bikes.

Let alone people do text messaging while driving. Do you think these people are illiterate or uneducated? On the contrary, these are very rich and educated people. Similarly while driving people do not use seat belts. Recently a prominent politician in India died in car accident mostly because he was not using seat belts. Everyone who drives the car knows the importance of seat belts but we seldom use in daily routine.

What leads to this irrational behavior? People are not centered properly. More activity doesn't mean more productivity always. In order to achieve more people tend to do more. In the stock market, they tend to trade more. They think that this particular trend is good so they jump in that stock. This trend worked today for my friend A so it will work for me tomorrow. Usually, this is at the top.

 However, it benefits the brokers more because they get more brokerages. it increases the frictional costs. It also benefits the stock exchanges, banks, government, TV channels who get there fair share of taxes and commissions and viewerships. Everyone encourages people to trade more. However, usually, the one who loses in the game is the investor himself. As Warren Buffet says that if you have a million dollars and you want to trade in and out of wall street then I would like to be your broker, not your partner.

 Mindfulness increases your rational behavior. if you practice mindfulness then your emotions get under control and chances of irrational behavior decreases. People tend to rotate like an off-centered flywheel often not realizing that more activity is not equal to more productivity. In order to achieve more, they tend to rotate even faster. That ultimately leads to flywheel coming apart. Mindfulness centers your thoughts. It brings calmness and rationality in anyone's behavior who tend to practice it. Rational behavior is the key to success in equity markets. As a matter of fact, it is vital to be rational in any field to be successful. Calm patient and rationality are the three most important features of any good investor.

 Mindfulness increases calmness and concentration power.

 This was for investors. However, mindfulness doesn't differentiate between traders and investors. It does not differentiate between swing traders, day traders or position traders. it can benefit all. It can improve concentration power of all who regularly practice it. It is very useful for professional traders who need to make rapid decisions. It increases rational behavior. Traders can go into depression if they make a series of losses. Mindfulness brings calmness and confidence in decision making. Markets are manic depressive and prone to wild swings. One should not get swayed by the wild swings of the markets.

Daily practice of mindfulness increases your chance of winning in the game of investing.

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