Firstly, I have to warn you that this newsletter diverges from the traditional financial topics that I usually write about. My advice is to read this newsletter with an open mind and be prepared for something different.
I had the pleasure of recently seeing Shawn Achor, a Harvard-trained researcher and an expert in happiness and human potential, speak at a conference in Istanbul, Turkey. The excellent presentation got me thinking about people’s level of happiness and its effect on their financial management success (you can watch a condensed 12-minute presentation here).
Let me start by sharing some of the notes I made from Shawn’s presentation and then look at some of the practical things you can do to master the psychology of happy investing.
Most people are not average – average is just a statistical measure – it’s not relevant. If you study the average you miss out on learning. Best to study the above average.
It’s not reality that changes us, it’s the lens that we view the world that changes us. What you focus on is your reality. If we know everything about your external world, we can only predict 10% of your happiness. 90% of your happiness is how you process that information. Learn how to control your mind and focus, then you can only focus on the positive.
School grades do not predict success. In fact, studies suggest that a roll of dice is 2% more likely to predict success.
If we know a child’s IQ we can only predict one third of success – so intelligence has little to do with it.
There are three things that determine success/happiness: 1) Optimism – belief that behaviour matters and you can alter the outcome 2) Strong social connection 3) View stress as a good challenge – not a negative thing.
Be careful because negative patterns train your brain. E.g. If you always look for mistakes at work (e.g. such as an auditor does) you’ll look for mistakes in personal life.
Happiness is a choice. What you attend to first is your reality.
Happiness spreads. The best way to change someone is to change yourself.
Happiness is a work ethic – it takes effort.
So what does this have to do with investing and managing money?
If happy people are more successful in life then it makes sense that happy people will also be better investors.
If you are happy you look for (focus on) the good news. This means you’ll see opportunities that others may not. Conversely, unhappy people look for the bad news to validate their feelings. What are you focusing on?
Happy people are more likely to be optimistic about the future meaning that they will be less susceptible to selling investments just because of perceived volatility. If your investment is of sound quality then you should focus on long term performance, not short term volatility.
I believe that positive people exude positive energy and that positive energy attracts positive outcomes.
So how do you make yourself happy?
Shawn offered a few exercises that you can do daily only – don’t try and do all of them at once – start by doing one of them:
3 gratitude’s – each morning write down and say out loud 3 things you are grateful for
The doubler – think about one meaningful experience and write it down and think about it and visualise it
The fun fifteen – 15 minutes of exercise
Meditation – start with one minute of meditation and do more gradually
Conscious act of kindness – send an email to someone in your social network thanking them for the contribution they have made to your life.
Undertake one of these for 3 minutes a day for 21 days and that is all that is required to rewire your brain.
Of course this idea applies to many things in life – not just your finances. Happy investing!
I’d love to hear your comments…