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Yoga Vs Financial Balance

Yoga helps harmoniously develop your body, mind and spirit; Yoga is a way of life. With the declaration by United Nations General Assembly to celebrate 21st June as International Yoga Day, the world is catching attention towards Yoga and its benefits. While most people relate Yoga to asanas, there is more to yoga than just asanas. Asanas are but one of the eight limbs of Ashtanga Yoga laid out by the Indian Maharsi Patanjali, author of The Yogasūtra.

1.      Avidya or Ignorance:  on how to create wealth is probably the biggest reasons for not investing favourably. There are largely two kinds of ignorance—first is the lack of knowledge and the second is wrong knowledge. Lack of knowledge on where to invest leads to investments based on hearsay. People invest money in stock markets based on tips from friends / relatives expecting it to grow overnight.

Second is wrong knowledge where people allocate most or all of their investments in sub-optimal asset classes like fixed income, gold or real-estate thinking that it is the best investment option to grow their wealth. As a result, most of these investors fail to achieve significant inflation adjusted return or real-return. Equity has outperformed all asset-classes in the long run and therefore the Yogic investment mantra to reduce this klesha is to include equity in your investment portfolio.

 2.      Asmitā or Ego:  is another klesha that must be avoided. “I know it all” or “I cannot be wrong” reflects one’s ego that can be injurious to your wealth. “I know it all” klesha typically build up during bull markets when stocks picked by the investor/trader are rewarded by the market with profits. This gives a false sense of superiority and it starts a negative loop of ignoring market signals, facts and trends.

The mantra to negate this bias is to “stay humble and ask for directions”. Learning is a never ending process and there is no shame in seeking expert advice backed by reputed institutions to validate your views. Make sure you check the success ratio before acting on their advice.

 3.      Raga or Attachment:  to an asset class or stock is yet another bias that is best avoided. Some people get emotionally attached to particular asset classes like gold (jewellery) or real-estate (property) and concentrate their savings in them. Similarly, there are others who invest in stock markets but get attached to one or two stocks that they like for emotional reasons. 

Always remember the Yogic Mantra of diversifying your investments through asset allocation. This is the best way to ensure predictability of returns as when one asset class or a subset of that falls there are others to compensate for the loss.

 4.      Dvesa or Aversion:  is the opposite of Raga i.e. aversion towards things that produce unpleasant experiences. Aversion towards equity happens either due to hearsay or bad past experience. Hearsay is probably one of the biggest reasons for low domestic retail participation in equity.

Historical data suggests that most retail investors enter the market at the peak of the bull-run. Stock market buzz catches up during a bull run and most of us get the feeling of being left out and as a result we invest in lump sum with the intent to make profits quickly.

When the market corrects, this creates an unpleasant experience. Therefore, rather than timing the market it is important for investors to stay invested in quality stocks for over a long period of time.

 5.      Abhiniveśāḥ or Fear of loss: is a major barrier to healthy investing. If your stock appreciates by 10 per cent, you may not be elated but if it corrects by 10 per cent, you feel terrible. This illustrates that investors react more to a loss than to a gain of similar magnitude.

This makes most investors park their investments in fixed income, which gives them predictable returns. It is important to understand that equity will never give you linear returns, as it is risky in nature, and you may incur losses. But over the longer term, you will be creating wealth.

Apply these simple mantras, avoid Panchklesha to watch your investments grow. On this International Yoga Day, let’s pledge not only for a better physical health but also a great financial health.

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