distractedMy post last week about avoiding pessimism got me thinking. Why is it so hard for investors to hang-in there during normal market volatility?

I think the answer is simple: we get distracted.

The same precept holds true when I practice my mindfulness meditation every morning. I get distracted by anything and everything. As I try to anchor on my breath, a thought enters my head. Perhaps the cat makes a sound. Perhaps my son wakes up early and actually remembers to flush after using the toilet. Perhaps I start thinking about a big meeting later that day. Perhaps I begin fantasizing about skiing. My mind constantly secretes random thoughts into the stream of consciousness that distract me from my breath.

The goal of my meditation practice is to calmly observe when this happens and return to my breath.

This very same practice can be applied to investing. When markets are moving every which way and pundits are working overtime to get our attention and prove their intelligence to us, we can’t allow them to distract us from our long-term financial plan. They insist we must pay attention to them RIGHT NOW in an effort to get us to DO SOMETHING different RIGHT NOW.

If we already have a stress-tested long-term financial plan (the blue line below) that we trust will work over time, our practice should be to return our focus to that plan.

rolling periods

Don’t get distracted by the constant “noise” generated by the pundits. Stick to your practice:

  1. Have a well-thought out plan based in your financial reality that contains agreeable trade-offs.
  2. Follow that plan.