A Mindful Approach for a Calmer Investment Journey

At Providend, investments are a means to achieve returns to enable our life goals. Our CEO, Christopher Tan, wrote about the 8 steps that we take to ensure the highest probability of success when we manage money for our clients:

Only using asset classes that, from empirical evidence, will give long-term expected returns
Using a scientific method to estimate future expected returns
Creating portfolios of different asset allocations with different risk levels and returns
Finding suitable instruments that will deliver these expected returns with higher certainty
Understanding life goals and events
Finding suitable portfolios to be able to deliver money when needed
Helping clients stay invested
Making adjustments

Step 7, helping clients stay invested, can be particularly challenging. While our approach in constructing bespoke wealth plans and suitable investment portfolios for our clients may be founded on evidence and science, the actual investing journey, as experienced by our clients, could be driven by emotions.

Each of us react differently to market volatility. This isn’t surprising as our behaviours are driven largely by how we think the market works. This, in turn, is shaped by our personal experience with money and investing.

When the market dips, some may view it as an opportunity to invest at lower prices. Others may worry that the lower prices would negatively affect their ability to meet their goals. The latter is more pronounced in those who have had negative investing experiences or are very close to their goal line (e.g. those due to retire in the following year).

In The Psychology of Money, Morgan Housel wrote, “a good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy”.

Doing the average thing in a market downturn is to stay invested. This can be difficult to do, especially when you see falling market prices and constantly hear bad news in the media. As fear and anxiety swell within you, how do you hold on to your portfolio?

Earlier this year, I attended a mindfulness course, where I learnt a lot about my own psyche and ways to manage my emotions. The theory is illuminating, but the practice is hard.

Firstly, what exactly is mindfulness? According to Mindful.org, “mindfulness is the basic human ability to be fully present, aware of where we are and what we’re doing, and not be overly reactive or overwhelmed by what’s going on around us”. The Oxford Learner’s Dictionary defines it as “a mental state achieved by concentrating on the present moment, while calmly accepting the feelings and thoughts that come to you, used as a technique to help you relax”.

Many of the mindfulness techniques that I have learned could be applied to help me be a calmer investor. Let me walk you through a hypothetical example in which the market has dipped by 10%.

1. Be Aware of Your Thoughts, Emotions, and Body Sensations

Our thoughts, emotions, and body sensations are data points that tell us more about how we are feeling at any moment. We want to be able to form a baseline picture of what calm feels like. To do so, you can try out a body scan exercise.

In this example:

Thoughts: Oh no! The value of my investment has fallen! This means I won’t be able to retire next year as intended. I feel like selling out my portfolio to protect it, in case it goes down further.
Emotions: I’m anxious and fearful.
Body Sensations: I sense tightness in my chest, my breathing is shallower and more hurried. The palms of my hands feel a bit sweaty as well.

The next time you find yourself deviating from your baseline, take note of what you are thinking and physically feeling. Once we become aware that we are deviating from our baseline of calm, we can move forward to steps 2 and 3 below.

2. Acknowledge Your Emotions and Learn to Sit With Them

With kindness and compassion, I tell myself that it is normal and perfectly okay to be feeling scared and anxious when the market dips. I close my eyes and focus on my breathing for a few minutes. Next, I imagine my thoughts as a balloon, and I’m holding it by the string. This helps to create some distance between the thoughts that I’m thinking and myself. While my thoughts and feelings are real, they are also temporal, coming and going as they please. Even though I own and create them, they do not define me as a person. After sitting with the thoughts for a few minutes, I let go of the balloon. As I watch it float away, I start to feel less anxious and fearful.

3. Take Appropriate Action

I consider what to do to feel better and who I can contact to get clarity on the situation. I decide to stop reading the headlines as they make me feel more anxious. I also realise that this isn’t the first time that I am experiencing a market dip. The last time this happened was in 2022. The market was down quite a lot. I recall speaking to my adviser then and was assured. Thankfully, I held on to my portfolio. It recovered and moved higher. I also remembered reading that market corrections are part and parcel of the investing journey. I want to speak to my Client Adviser, but it’s almost 11 pm. I text him instead, requesting a call the next day. To take the edge off, I tune in to my favourite Netflix show, Midnight Diner, before turning in for the night.

With practice, mindfulness can help us be less reactive to situations, increase our tolerance for discomfort, and build emotional resilience. Over time, we could learn to be a voice of reason and calm for ourselves.

I’d like to leave you with a poem that spoke deeply to me. It also reflects Providend’s philosophy in guiding our clients through their long-term investment journeys. As you reflect on its wisdom, I hope you’ll embrace the importance of prioritising life decisions before financial decisions. As a trusted adviser to our clients for over two decades, Providend has found that this approach consistently enables our clients to lead a good life, one that is fulfilling and calm.

Walk Slowly (by Danna Faulds)

It only takes a reminder to breathe,
a moment to be still, and just like that,
something in me settles, softens, makes
space for imperfection. The harsh voice
of judgment drops to a whisper and I
remember again that life isn’t a relay
race; that we will all cross the finish
line; that waking up to life is what we
were born for. As many times as I forget,
catch myself charging forward
without even knowing where I’m going,
that many times I can make the choice
to stop, to breathe, and be, and walk
slowly into the mystery.

This is an original article written by Annette Lee, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.

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