A Grain of Buddhism to Your Investing
W.V. is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Buddhism stresses the no-soul, the constant change and fluctuation of any being or objects in the universe. Because we are always changing, the only moment in life that matters is the present. The future - just guesswork. And the past? All a memory, all gone and no longer of any importance. What the Buddha stressed above all was mindfulness - mindfulness to your surroundings, to your thoughts, to reality. And reality, he said, only exists in the present.
This makes sense to a certain degree because the stock market's daily behavior is ruled by the psychology of panicky and even slightly pathological investors.
Now don’t walk off from this article thinking that the only people who influence the stock market are the individual investors. A variety of factors actually induce those erratic ups and downs, such as the businesses themselves and their decisions, wise or maybe even investor-unfriendly as they may be. But I believe in keeping things simple; as I said in my first, introductory post, monkeys outperformed certified stock brokers when investing. Just keep it in the back of your head that businesses are made up of people, too, and that an entire new subject is rising up in colleges around America regarding psycho-economics. The psychological, pathological musings of the individual play perhaps, although quite arguably, the primary or at least a main key in the stock market’s swings.
I'll admit myself a similar Fool. I hated J.C. Penney (NYSE: JCP), because it wasn't high-end enough for me to shop at, and therefore I refused to shop among their shares. But when I finally let go of that ridiculous thought pattern, and disallowed my emotions and prejudgments from ruling my decision-making processes, I realized that wait - they've got a new president and oh my goodness, it's suddenly quite the find now.
That president actually just recently moved from the director of the Apple (NASDAQ: AAPL) stores and product placement within them, working directly with Steve Jobs to revolutionize the layout of the computer store to a whopping $5,600 (approx.) profit per square foot per store in the United States annually. Next down the list as the company with the highest profit per square foot per store in the U.S: Tiffany’s (NYSE: TIF), at a whopping $2,000 less. Talk about setting the curve.
While it’s a really great sign and very significant matter to factor in, how much money the average store actually generates, as that directly relates to the bottom line, it's not the reason I chose to place my precious-earned money into JCP. Otherwise, I would have hedged my bets by investing some in Tiffany’s, or even the third down the list, Coach.
No, I placed my money in J.C. Penney, a place where hereto I absolutely refused to shop at, because some famous guy who worked with an even more famous guy at one point in his career and made some very well-known and respectable changes, moved over to JCP. And I figure people will find out. If the news doesn’t spell it out for them, the new layout of the stores and catalogs or the hopeful exponential increase in profits will. And then the sheep will come. People will start thinking of JCP as sexy (the stock, not the clothes), and then they’ll flock to pour in their money. I bought my shares when the price was still unaffected by the news of the new president, and I will keep my money in until it is.
See how I outsmarted myself there? I, that cooky individual investor with the power to turn a bull into a bear (with a couple million other individual investors, at least), actually thought ahead of a price fluctuation and acted on information rather than reacted to others’ actions or even worse, others’ reactions.
I used the Buddha’s great words of advice to my advantage. But I also know that change, although inevitable, can be slow. I won’t time the market – change comes at all different paces.
Instead of attempting the impossible and trying to out-perform those darn monkeys, I simply used the Buddha’s wisdom to my advantage. Just notice: my thoughts did not run away with me. I was mindful of my prejudgment of JCP, so I recognized a thought as simply a thought and did a little digging. And I found some gold.
So follow your initial thoughts, and you'll be following the market. Watch how easily you fall for trends already in process, putting your money in with the rest of the sheep when the stock is at or nearing its peak.
So pull yourself out of groupthink. Don't be a sheep, be a buddha. Or at least follow him when you invest. Be mindful and conscious of why you are holding your money or selling it. But remember, even if you evolve into a new, fully aware investor, not everyone else does. So when the stock market plummets and your favorite little stock stays stagnant or even better, goes up, know that it will probably get pulled down, too, by that blasted thing called groupthink.
And that's where, instead of pulling out with the rest of the suckers, you pool your money in, and just like that, you’re a savvy, Buddha-like investor, leading the curve rather than riding behind it.
WVBards owns shares of J.C. Penney Company. The Motley Fool owns shares of Apple and Tiffany & Co. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!