A few weeks back we met one investor. While he was sharing his success story of long-term investing in stocks, he gave us a quick foretaste that yoga somehow helped him to earn better returns on his portfolio. While he thought it was just a sheer coincidence, we could quickly spot a pattern between long-term investing and yoga.
Yoga has been an age-old method towards physical and mental well-being. But why?
There is a popular adage which explains this, “You cannot always control what goes on outside. But you can always control what goes on inside.”
And no quote can be more germane to what we imply here.
Stock markets are volatile. Even when the interest is swamped with many stories on the importance of focus and long-term investments in stocks, many investors turn a deaf ear and indulge in short-term trading. They fall into the prey of futile attempts to time the market, greed while trading and lack of focus while transacting in a stock market.
As per Patanjali Yoga Sutra, which is one of the oldest manuscripts related to yoga, talks about five main ailments or kleshas which are the root cause of all the sorrows which the human faces. They are:
- Avidya (Ignorance)
Consider a scenario of how we purchase the latest gizmo. We check the features, compare prices, check reviews on the internet, ask users and then finally zero down on our list. When making an equity investments or a mutual fund investment, one needs to perform the fundamental analysis of stocks and even scrutinise the credentials of the fund manager.
- Asmita (Egoism)
This is observed in a scenario of a bull market when investors book humongous profits. Engulfed in this victory, many investors wear the ‘I know it all’ attitude and become overconfident. They tend to miss the trends, start betting on risky stocks and eventually over-leverage themselves.
- Raga (Attachment)
In India, gold or real-estate always hold a sentimental value. Many investors are also attached to a particular stock and hold them for their lifetime irrespective of the downtrends. In a stock market, one needs to take a rational call and avoid any form of attachment which can lead to decisions dominated by emotions.
- Dvesa (Aversion)
Due to past losses, many investors are averse to the risks associated with the equity markets.
In a bull run when they hear success stories, they get encouraged to invest the lump sum amount in an attempt to earn double returns. And when the market corrects, they book losses which deter even other investors from investing in the Indian stock market. These losses are due to attempts of timing the market instead of patiently staying invested in a stock which has high growth potential.
- Abhinidvesa (Fear)
This is the main reason why many investors hold back themselves from healthy investing. The magnitude of loss always surpasses the joy. To avoid this fear, many investors take the traditional route of investing in fixed income, post office savings scheme to earn predictable returns. However, equity markets have outperformed all the asset classes in the past and a Yogi who carefully invests in strong stocks for a long-term enjoys the benefits of the power of compounding.
Yoga can also teach a lot about financial health. Here’s how chanting ‘Om’ can help you in achieving financial well-being:
- Gain consciousness of the bigger picture: We all breathe in and out while practicing yoga to gain consciousness of our mind and body. Being aware of the options you have and the impact of these options, can help an investor to take an informed decision.
- Practice make man perfect: Learning yoga asanas and becoming comfortable with it demands an investment of time, efforts, and patience. While making stock market investments, you need to be patient to let your investments grow while simultaneously monitoring them.
- Life is all about balance: It is all about striking a right yoga pose to gain the maximum benefits. Stock market investments are also all about the right balance of stocks in your portfolio.
- Life is too short to learn from your mistakes: A yoga expert guides you to understand when to hold the yoga pose, when to breathe in and out and the importance of each asana. Similarly, a good financial advisor conducts fundamental research so the probability of you falling into a trap is minimal. They guide you on when to exit and enter the market, portfolio composition and the rationale behind why a particular stock is a good buy or a sell.
- Panicking never helps: Imagine you doing a handstand for the first time, swinging in mid-air and then you try to swiftly swing your legs towards the ground. You will injure yourself, right? But what if you have calmly waited and allowed your feet to reach the earth safely? Similarly, taking an impulsive decision with regards to investments can result in financial damages.
The purpose is to achieve the state of harmony, also called ‘Sattva’. This is the utopia state which is between the state of Tamas (inactivity) and Rajas (energy). Here, investors thoughtfully invest in asset class based on their risk profile, research and financial goal. They build a diversified portfolio based on the fundamental analysis of a stock which results in a low churning rate of the portfolio, high returns in the long-term and financial well-being.