The natural inclination of the mind at a time like this is to assume that the trend of the recent past will continue into the future; that there’s a sort of permanence to current market conditions. As a response, the primary thing I’m saying to clients is “don’t get attached to it because everything is impermanent, especially the market’s level.” That doesn’t mean I predict it’s going to go down. But I do predict it’s going to change, constantly.
Controlling Our Thought Waves
I’m writing this email from Mysore, India, where I’m coming to the end of five weeks of study of yoga (both the physical practice and the philosophy behind it). The Indian sage Patanjali wrote down 196 teachings (called Sutras) in the second century BCE. The very first of these teachings is, “yoga is the control of thought waves in the mind,” which unfortunately is not taught enough alongside the sweaty contortions that have come to symbolize American yoga.
When we relate to our reactions to the market as “thought waves” it brings a certain objectivity and distance that can keep us from becoming overly attached. Without this objectivity, we are often blinded by our hope (or at other times, fear).
Non-Attachment Is Self-Mastery
Another of the Yoga Sutras, “Non-attachment is self-mastery,” helps Abacus institute our rebalancing system without interference from the emotions of hope or fear. When a particular asset category rises outside of its pre-defined acceptable range, a sell recommendation is automatically generated by our software. But it’s not a black box; one of our portfolio managers will look to see if the trade makes sense, and if it does, escalate it for level 2 approval from the financial advisor who oversees that client’s overall financial plan. So there’s a human component too. Such a system often forces us to sell part of an asset category right when it’s reaching record levels, or to buy when everyone is despairing (as we did in March 2009 at the market bottom). This is not something most human beings will do voluntarily, which is why we’ve made it part of a well-researched, disciplined system.
As another of the Yoga Sutras says, “Practice becomes firmly grounded when it has been cultivated for a long time, uninterruptedly, with earnest devotion.” When Patanjali wrote this, he was likely referring to the physical postures, breathing and concentration practices yogis did at the time. But it’s just as true of money management.
