Posted: August 16, 2011
Zen and the art of investment
Zen wisdom #1: Stick to your principlesHelen Raleigh
Do you feel like throwing in the towel and bailing out of the market completely?
The emergence of Zen as a distinct school of Buddhism was first documented in China in the 7th century CE. From China, Zen spread south to Vietnam, and east to Korea and Japan. The aim of Zen practice is to discover this Buddha-nature within each person, through meditation and practice of the Buddha's teachings.
I want to share with you some wisdom from ancient Zen Masters, and hopefully, these time tested wisdom can help you to deal with investing and live a life in a much more peaceful and happy way.
Zen wisdom # 1: Stick to your principles and let go of temptations. Here is a famous Zen parable: One day, a Zen Master and his young disciple were travelling in the countryside. They saw a beautiful young woman standing by the creek crying because she was afraid of crossing the creek. The Zen Master carried her to the other side of the creek, put her down and then continued his journey. After a while, the young disciple cannot help and asked "Master, one of the principles of our practice is not to interact with women. How could you carry the young lady across the creek like that?" The Master answered "All I did was to help her to cross the creek. I already left her at the bank. However, you still carry her in your mind."
What this parable is trying to tell us is that there are many temptations in life. Temptations come and go. However, as long as you stick to your own principles, knowing what is right for you, all you have to do is to acknowledge their existence and let them pass. Do not let temptations alter your own path.
How do you apply this to investing?
Remember your investment objectives. Are you seeking to maximize return as soon as you can or you are investing for a secured financial future some time down the road? If you are investing for a secured financial future down the road, let this objective guide you. Work with a trust worthy investment advisor to develop a sound long term investment strategy and stick to it. Do not let the short term market noise distract you. Acknowledge that volatility exists and let go of the temptation to sell into panic.
Zen wisdom #2: Short-term detachment can be beneficial. During the period of frustration, crisis or chaos, it is very natural for us to react immediately. However, we often forget the simple truth that a person cannot see his or her own image in running water.
Therefore, sometimes during a time of chaos, it is best to step back and take a deep breath. A Zen Master said that "to be overjoyed at success and destroyed at failure is to be become a victim of circumstances." Paradoxically, when we let go of attachment to outcomes, success is often the result. Zen Master encourages us to achieve happiness through not being attached to the short-term outcomes.
Bill Gross, the famous bond manager from PIMCO, who manages one of the largest bond fund in the world, mentioned during a Bloomberg interview this week that during the market turmoil, he left his office and went to take a yoga class. All of us could achieve an inner peace by detaching ourselves from short term outcomes, turning away from outside noises. If we ride out the difficult and discouraging times with a peaceful mindset, we will eventually achieve what we want.
Have you ever watched any top golfers compete? Good golfers' "mental toughness" comes from their undistracted and intense focus on the green (the ultimate long term goal). When they occasionally hit the ball outside the fairway, they normally step away from the ball, which allow them to reevaluate the new angel and distance to the target. Therefore, their next shot will get them back to the green.
Zen wisdom # 3: Welcome and respect changes. The universe we live in is constantly changing. Nothing is static. This includes the stock market. The word for crisis in Chinese contains two distinct meanings at the same time: danger and opportunity. Zen Masters recommend that we should welcome changes enthusiastically, and take the unpredictable variations as opportunities to develop a stronger sense of self.
Life, as well as the stock market, is like a moving pendulum, if you don't like the current situation, give it enough time, it will change. Therefore, rather than worrying about short term variations, we are better off focusing on our long term goals.
Helen Raleigh, CFA is the owner and Chief Investment Officer for Red Meadow Capital, LLC, a Colorado Registered fee-only Investment Advisory Firm, which focusing on providing clients with honest and sound financial advice. She has more than 10 years experience in the financial services industry ranging from pension funds to risk management. Helen is the author of an autobiography, "Confucius Never Said." She writes insightful columns and blogs for a variety of media outlets and her writings can be found at the Wall Street Journal, the CFA Magazine, the Denver Post and her blog postings. She can be reached at: firstname.lastname@example.org