Rational Advisor

Did you know that every Hotel in Hawaii has a copy of a certain book, besides the Bible.

It’s the teachings of Buddha written/spoken in 486 BC

A lot of the characteristics that showed up in successful investors also showed up in Buddhist philosophy.

Here are the main points and their relationship to investing

The Four Noble Truths
1. There is Suffering Suffering is common to all.
2. Cause of Suffering We are the cause of our suffering.
3. End of Suffering Stop doing what causes suffering.
4. Path to end Suffering Everyone can be enlightened.

1. Suffering: Everyone suffers from these thing
Birth- When we are born, we cry.
Sickness- When we are sick, we are miserable.
Old age- When old, we will have ache and pains and find it hard to get around.
Death- None of us wants to die. We feel deep sorrow when someone dies.

Other things we suffer from are:
Being with those we dislike,
Being apart from those we love,
Not getting what we want,
Investing - worries about the uncertainty of it, the volatility of it
All kinds of problems and disappointments that are unavoidable.

The Buddha did not deny that there is happiness in life, but he pointed out it does not last forever. Eventually everyone meets with some kind of suffering. He said:
“There is happiness in life,
happiness in friendship,
happiness of a family,
happiness in a healthy body and mind,
…but when one loses them, there is suffering.”
Dhammapada

2. The cause of suffering
The Buddha explained that people live in a sea of suffering because of ignorance and greed. They are ignorant of the law of karma, laws of the markets and are greedy for the wrong kind of things and pleasures. They do things that are harmful to their investments, bodies and peace of mind, so they can not be satisfied or enjoy life.

For example, once children have had a taste of candy, they want more. When they can’t have it, they get upset. Even if children get all the candy they want, they soon get tired of it and want something else. Although, they get a stomach-ache from eating too much candy, they still want more. Replace the word candy with investment sector/country/etc. What we want is our choice of grande iced flappa-wacker-skinny-chino on rye to go, in like, two minutes, and for only five bucks, so we don’t really mind. Like the kids in Pinocchio, we don’t realise that, at this very moment, we are becoming donkeys. The things people want most cause them the most suffering. Of course, there are basic things that all people should have, like adequate food, shelter, and clothing. Everyone deserve a good home, loving parents, and good friends. They should enjoy life and cherish their possessions without becoming greedy.

3. The end of suffering
To end suffering, one must cut off greed, fear and ignorance. This means changing one’s views and living in a more natural and peaceful way. It is like blowing out a candle. The flame of suffering is put out for good. Buddhists call the state in which all suffering is ended Nirvana. Nirvana is an everlasting state of great joy and peace. IN Investment terms, Nirvana is not the continuing uptrend of the markets, they never going down. But more the acceptance that downs are a normal part, and accepting them, and taking advantage of them. And cutting of the fear and greed.

4. The path to the end of suffering: The path to end suffering is known as the Noble Eightfold Path. It is also known as the Middle Way.

THE NOBLE EIGHTFOLD PATH

1. Right View. The right way to think about life is to see the world through the eyes of the Buddha–with wisdom and compassion. To have the right view on the markets, and not get carried away with the daily news and events that excites or depresses us.

2. Right Thought. We are what we think. THink carefully about your investments, chhose them with the right understanding, and not based on some excited phase, do rational thinking.

“Be fearful when others are greedy and greedy when others are fearful” - Warren Buffett
Do not let your emotions get control of you-invest with reason and logic

3. Right Speech. By speaking kind and helpful words, we are respected and trusted by everyone. Don’t speak about markets as if they are a cursed thing, understand that the way you speak about your investments also affects you physically.

4. Right Conduct. No matter what we say, others know us from the way we behave. Before we criticize others, we should first see what we do ourselves. The same goes with investing, it’s no use criticizing or comparing against other investment or products. Should have been in GICs, or this fund is better than yours etc. This gets you nowhere.

5. Right Livelihood. This means choosing a job that does not hurt others. The Buddha said, “Do not earn your living by harming others. Do not seek happiness by making others unhappy.” Do not choose investments, because they are planning to do some investment harm - this is why derivatives and such are not as great as they seem. The normal trend of investments is based on companies growing and making profits. Derivitaves such as shorts etc benefit from others having pain. There is a need for them to control risk. But the exaggerated use of deriviatives with leverage is a big cause fo the pain we are all collectively going through in the markets.

6. Right Effort. A worthwhile life means doing our best at all times and having good will toward others. This also means not wasting effort on things that harm ourselves and others. IN investing, right effort, means making sure that the managers you have chosen have the right experience, that homeowrk has been doen in their selection and choice. They weren’t just chosen/rejected because of their recent past performance.

7. Right Mindfulness. This means being aware of our thoughts, words, and deeds.

8. Right Concentration. Focus on one thought or object at a time. By doing this, we can be quiet and attain true peace of mind.

Following the Noble Eightfold Path can be compared to cultivating a garden, (similarly fro an investment portfolio) but in Buddhism one cultivates one’s wisdom. The mind is the ground and thoughts are seeds. Deeds are ways one cares for the garden. Our faults are weeds. Pulling them out is like weeding a garden. The harvest is real and lasting happiness. In investing, the investment portfolio is the ground and the money you invested is the seeds. The management of them is the care for the garden. Our emotions are the weeds. Pulling out your emotions from your investments is like weeding a garden. Bad weather can come, bad weather can cause havoc, but with continuance of management care, and good seeding the harvest is real and lasting.

Ultimately it’s all about

“ When proper temperament joins up with the proper intellectual framework, then you get rational behavior.” – Buffett

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