Meditation for investment professionals | CFA Institute Enterprising Investor

Posted in: Alternative investments, Behavioral finance, Derivatives, Engines of value, Equity investments, Fixed income, Leadership, Management and communication skills, Portfolio management, Risk management, Standards, ethics and regulation (SER)

There has been an explosion of interest in meditation within the business community over the past few years. What most people in the financial industry don’t realize, however, is that meditation offers unique benefits that directly address many of the barriers we all face every day.

More on that in a moment. But first, who in finance and business is pursuing the practice?

Who meditates in investing?

Several well-known investors are public advocates for their meditation practice. These include Ray Dalio of Bridgewater Associates, Paul Tudor Jones II of Tudor Investment Corporation and Michael Novogratz of Fortress Investment Group. Additionally, BlackRock, Deutsche Bank, and Goldman Sachs each have meditation programs in place for their employees. A number of prominent business schools also encourage meditation among their students, including Georgetown, New York University, Claremont Graduate University, and Oxford.

The CFA Institute surveyed its members in 2014 and found that overall 59% wanted the CFA Institute to develop a meditation program. The study also revealed that approximately 16% of CFA Institute members currently meditate. A more detailed follow-up survey of this latter group found that while one in six meditated, none of them knew of other people in finance who did. This means that one of your colleagues is probably meditating and you just don’t know it.

Meditation Literature

One of the reasons meditation has been stigmatized for so long is that there are many popular fictions about the practice. By far the most important of these is that meditation is only for cave dwellers with shaved heads. In truth, the states of consciousness achieved through meditation (as measured by brain waves) are innate to human consciousness. Each of us has experienced these states, but few of us have developed the focused awareness necessary to achieve them at will, despite the benefits of doing so. This means that meditation can be practiced secularly, separate from any religious trappings. There is no need to go out and shave your head!

Another common misconception is that there is only one way to meditate. In fact, there are hundreds of different meditation styles and practices. While it can make the subject daunting, by focusing on the mental and physical benefits of individual meditation methods, you can reduce the vast majority of styles to just four varieties: focused awareness, open monitoring, visualization, and compassion.

Finally, if you’ve heard of or tried to meditate, you probably think it’s hard to do. Nothing could be further from the truth. Just as walking is innate in humans, so are the states of consciousness achieved through a meditation practice. But just like walking, it takes time and practice to learn. Because our modern culture is obsessed with the quality of our intelligence, meditation can make many of us stupid as it quickly demonstrates that most of us cannot control our thoughts. But gravity also makes those learning to walk feel dumb at first. With practice and a sense of exploration and enjoyment, just like walking, meditation becomes easier.

Investment Industry Obstacles

Meditation should be of particular interest to investment professionals because we:

  • Deal with a tremendous amount of stress.
  • Have a relentless quest for the alpha.
  • Having difficulty overcoming behavioral biases.
  • Facing ethical dilemmas.

Science shows that meditation is a powerful antidote to each of these obstacles. Plus, meditation is a portable activity, and it’s free!

What the science says

Stress relief

Stress reduction is by far the most well-known benefit of meditation, and it has been tested extensively in this context, with several thousand related research articles published in peer-reviewed journals. A recent massive meta-analysis found significant evidence that meditation alleviated anxiety, depression, and pain. Stress is implicated in cardiovascular disease, osteoarthritis and osteoporosis, Alzheimer’s disease, stroke and diabetes, all big killers. Not only are meditators able to reduce their stress, they can change the composition of their own DNA.

Increased mental functioning

If you think alpha generation is doing something your peers aren’t, it requires increasing your creativity. Meditation is scientifically demonstrated to do just that. Additionally, studies have shown that meditators have better memory and consciousness and are more decisive.

Ability to overcome behavioral biases

With several Nobel Prizes awarded to behavioral economists for their work in identifying persistent human biases, you would think that each of us is improving the performance of our investments. Unfortunately, behavioral finance is essentially diagnosis without a prescription. This is confirmed by a 2014 survey of CFA Institute Financial NewsBrief readers who found that 56% of respondents had failed to implement behavioral finance in their practices. In fact, when asked what can be done to overcome behavioral biases at the CFA Institute’s 65th Annual Conference in 2012, the grandfather of behavioral economics, Daniel Kahneman, replied, “Very little ; I have 40 years of experience in this field, and I still make these mistakes. Knowing about mistakes is not the recipe for avoiding them.

Yet meditation can help practitioners overcome even racism and ageism. Additionally, several direct tests show that meditation can counteract many of the biases identified by behavioral economics and can dramatically improve performance.

Increase ethics

Dan Ariely and other researchers have demonstrated that there is some blatant liars and cheats in society. Instead, most of us cheat just a little. Of course, all in all, this equates to a much bigger problem than the proverbial “bad apple” creates. Our business frequently presents us with ethical dilemmas that we attempt to resolve through codes of ethics. Unfortunately, codes of ethics have proven to be of limited value in preventing the very violations against which they are meant to protect. Yet studies show that meditators tend to behave more ethically – not because they’re told they should, but because they want.

It’s time to start!

Given the many proven benefits of meditation for investment professionals and its exceptionally low cost, the question is not, “Why don’t you meditate?” It’s, “When will you start?” To that end, the CFA Institute has spent the past three years conducting extensive research and developing a program for our members. Look for it in the next few months.

If you want more information on meditation for investment professionals, join the new CFA Institute Members Meditation Group on Linkedin.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.

Photo credit: ©iStockphoto.com/Kaligraf

Jason Voss, CFA

Jason Voss, CFA, is relentlessly focused on improving investors’ ability to better serve end customers. He is the author of Foreword Reviews Business Book of the Year runner-up, The intuitive investor and the CEO of Advisory in active investment management (AIM). Voss also subcontracts for the well-known firm Focus Consulting Group. Previously, he was a portfolio manager at Davis Selected Advisers, LP, where he co-managed the Davis Appreciation and Income Fund for Outstanding Returns. Voss holds a BA in Economics and an MBA in Finance and Accounting from the University of Colorado.

Ethics statement

My ethics statement is very simple, really: I treat others as I would like to be treated. In my opinion, all ethics systems boil down to this simple statement. If you think I’ve deviated from this norm, I’d love to hear from you: [email protected]