Everything I Need to Know About Investing I Learned In Yoga: Part II - Overcoming Mental Obstacles in Investing

Navigating Financial Decisions: Overcoming Mental Obstacles Through Yoga Philosophy

On our main journal I wrote a post: The Psychology of Investing: How Behavioral Finance Shapes Financial Success. In both yoga and finance, mental patterns shape our decisions and outcomes. Yoga philosophy identifies kleshas and gunas—mental afflictions and qualities of nature—that can hinder progress. Similarly, behavioral finance highlights core psychological obstacles that affect investors. By understanding these parallels, we can navigate both financial and personal challenges more effectively.

The Five Kleshas and Their Financial Parallels

In both yoga and finance, the mind plays a powerful role in shaping decisions. Behavioral finance, a field that studies how emotions and cognitive biases influence financial decisions, mirrors the obstacles identified in yoga philosophy. The kleshas, or mental afflictions, can disrupt our judgment and lead to financial missteps. By recognizing these mental obstacles, we can create more mindful, informed, and balanced financial decisions.

Avidya (Ignorance)

Avidya in yoga represents a fundamental misunderstanding of reality, a veil over true perception. In finance, avidya often manifests as recency bias—the tendency to make decisions based on recent events while ignoring long-term trends. This ignorance can lead to faulty assumptions about market performance or personal financial circumstances, guiding one into decisions that may be short-sighted or misinformed. Additionally, confirmation bias—the tendency to seek information that confirms our beliefs—reinforces this ignorance, as it causes us to ignore risks or alternative viewpoints.

Asmita (Egoism)

Asmita is the identification with the ego, where one's self-worth becomes entangled with personal achievements or failures. In the financial realm, this egoism can show up as overconfidence, where an investor believes their superior knowledge or skills will always lead them to success. This often results in excessive trading, risk-taking, or an inability to accept losses. Ego-driven decisions can cloud judgment, leading to poorer financial outcomes. This mirrors the behavioral finance concept of overconfidence, which leads investors to believe they can predict market movements with greater accuracy than they realistically can.

Raga (Attachment)

Raga refers to an excessive desire for pleasure or attachment to things, including past successes. In finance, this attachment might appear as holding onto a once-profitable investment long past its prime, refusing to accept that it is no longer aligned with one’s goals or current market conditions. Just as in yoga, letting go of attachments is essential for growth and freedom—so too is letting go of underperforming investments to make room for better opportunities. In financial terms, this resembles the anchoring bias, where investors cling to an initial reference point, such as a stock's purchase price, preventing them from making rational, objective evaluations.

Dvesha (Aversion)

Dvesha involves aversion to pain or discomfort, driving us to avoid situations that make us feel uneasy. In the financial world, this manifests as a fear of loss, sometimes resulting in the avoidance of investments altogether after experiencing a painful downturn. This aversion can lead to missed opportunities, such as failing to diversify a portfolio or invest in emerging asset classes, out of fear that they might lead to further losses. This mirrors herd mentality, as investors often avoid discomfort by following the crowd, even if it leads to buying at market highs or selling during panics.

Abhinivesha (Fear of Death)

Abhinivesha reflects the fear of death, a deep-seated fear of change and the unknown. In financial terms, this manifests as a reluctance to change or adapt—whether it’s sticking with outdated strategies out of familiarity or avoiding new technologies or financial models that seem risky. This fear of change can prevent one from evolving and seizing new opportunities, ultimately hindering financial growth. In finance, this is akin to loss aversion, where the pain of losing money is so great that it often outweighs the benefits of gaining it, leading to poor investment decisions.

The Importance of a Financial Plan: A Guide Through Uncertainty

Just as yoga provides tools to clear the mind and overcome the Kleshas, a well-crafted financial plan offers clarity in the face of uncertainty. Having a financial plan in place helps avoid knee-jerk reactions based on emotional impulses or cognitive biases, leading to more rational decision-making. A financial plan is a guiding framework that:

• Provides Clarity: Defining clear goals and steps to achieve them creates a roadmap that can keep you focused even in turbulent times.

• Encourages Discipline: A solid plan fosters consistency, helping you stay on course even when external factors like market volatility create emotional turmoil.

• Offers Flexibility: While discipline is key, a good plan also allows for recalibration as life changes, ensuring you stay aligned with your long-term vision.

Adhering to Your Plan: A Practice in Discipline

In yoga, progress is driven by consistent practice and discipline. Similarly, in finance, discipline and commitment to your financial plan can help mitigate emotional impulses. Adherence to your plan allows you to combat the Kleshas—whether it’s fear (Abhinivesha), attachment (Raga), or ego (Asmita)—and stay on track. By regularly reviewing and refining your plan, you ensure it evolves alongside your goals and external conditions.

The Role of the Gunas: Cultivating Positive Financial Habits

Just as the Kleshas represent the obstacles that hinder progress, the Gunas (qualities of nature) represent the positive traits that can help us make sound decisions. In finance, we can apply these to foster better financial habits.

• Sattva (Purity, Balance): In financial terms, sattva represents calm, clarity, and a balanced perspective. It helps us remain thoughtful, evaluate all options, and prioritize long-term stability over short-term gains.

• Rajas (Activity, Passion): Rajas can drive motivation and action. While it can sometimes lead to impulsive behavior, when tempered with self-awareness, it fuels the passion to work hard, seek new opportunities, and stay engaged with financial goals.

• Tamas (Inertia, Darkness): While tamas represents stagnation, it can also indicate the need for rest and reflection. Financially, tamas serves as a reminder to pause, take a step back, and assess where inertia or inaction may be preventing progress—perhaps avoiding reckless or overly hasty decisions.

Creating Balance: The Intersection of Yoga and Behavioral Finance

By understanding and addressing these behavioral finance obstacles, you can cultivate a mindful and disciplined approach to investing. Just as yoga provides a structured path to overcome mental obstacles, a financial plan serves as a foundation for sound investment decisions. At Berkshire Wealth Group, we integrate these principles to guide clients toward financial well-being, helping them develop greater awareness and discipline in their financial decisions.

For more insights on the intersection of yoga and finance, visit our Yoga & Finance page.

Everything I Need To Know About Investing I Learned In Yoga: Part I - Discipline and Commitment

I began practicing Ashtanga yoga in 2001. My first class was on the Thursday before September 11th at a slightly run-down yet beautiful loft space on the outskirts of Park Slope in Brooklyn. The tech bubble had begun its burst in March 2000, and I was in the thick of advising clients on how to sit still during the first major bear market of my career. I won't lie, there were times I wanted to quit. Instead, I started running and ultimately practicing yoga to help deal with the stress. During that first class, I discovered something in this style of yoga that brought me incredibly deep peace. I remember riding the train back to Manhattan that night feeling truly euphoric.

This practice has brought me so much more than that first euphoric high though. It has taught me patience and discipline. It has taught me to listen when something doesn’t sit right with me. And it has helped me to breathe and sit still rather than spinning out in panic when everything seems to be moving in the wrong direction.

These benefits haven’t all come easily or without a little pain and suffering. In my second or third year of practice I suffered a common yoga injury — a tear where the hamstring attaches to the sit bone. lt felt like such a setback at the time. I’d always had tight hamstrings but they had opened up so much in those first few years. So at first this injury was tough to swallow. But in the time it took to recover I discovered so many deeper lessons. I was able to focus on strength and flexibility in other areas of my practice. This experience of getting injured during yoga felt a lot like dealing with a market correction. It can be so painful and scary to see these backward moves, but they are also an inevitable part of growth and opportunities for even greater growth —downturns are when we double down. We don’t get higher returns without ups and downs along the way. And we can use these downturns as opportunities. Sure I could have stuck with more gentle yoga that didn’t have me pushing my physical and emotional limits, but I don’t believe that would have brought me the strength, endurance, and vitality that a more challenging practice has brought me.

This experience taught me an important lesson that would apply to both yoga and investing: sometimes when we get injured or face setbacks, we want to quit. When markets are down, we might feel like we want to get out to preserve what we have and not risk further losses, or to find "safer" investments. But staying disciplined and committed to a plan has shown the greatest rewards in both disciplines.

Over the past 28 years, I have seen staggering growth in the markets. $1,000 invested in the S&P 500 in 1997 when I first started working in finance would be worth almost $13,000 today (January 2025)! However, this growth didn't come without challenges. During that 28-year period, there have been four major bear markets:

1. The Dot-Com Bubble Burst (2000-2002): The S&P 500 fell by approximately 49%

2. The Global Financial Crisis (2007-2009): The S&P 500 dropped by about 57%

3. The COVID-19 Pandemic (2020): The S&P 500 fell by approximately 34%

4. Inflation and Interest Rate Hikes (2022): The S&P 500 declined by about 25%

The market has also experienced several corrections (declines of 10% or more but less than 20%) during this period, which are more frequent than bear markets. Remarkably, that 13-fold growth happened even with all of these pullbacks. And the times of greatest growth are almost always immediately following these downturns.

As an investor, if you sold when your investments were down, you likely would have seen only a small fraction of that growth or even losses. Similarly, the personal growth I have experienced as the result of a dedicated yoga practice over the past 20 years since that injury is on par with the growth I've seen in portfolios over that time. And it didn't happen by quitting or switching disciplines whenever I had doubts or setbacks, or by not practicing when it didn't feel rewarding.

Investing and Yoga are similar in many ways, but perhaps the most striking similarity is that both are like digging a well in search of water. You need to do your research (or find a professional who has done it for you) to show you where to dig, but then you keep digging until you find water. Digging one hole 5 feet deep and then giving up every time you hit a rock, only to try 10 other places (each with their own rocks in the way), is not likely to yield a source of water. But if you dig 10-30 feet deep in one place and work your way around the rocks, you've likely got yourself a well that you can drink from for a long time.

Of course, the parallels between yoga and investing don't end there. Both disciplines require you to diversify your approach, beware of greed and false prophets, cultivate patience, and embrace the world as it is in all of its imperfection. I’ll expound on all of these themes and others in future posts as I continue to show the connections between the ancient practice of yoga and the modern world of finance.

Just as that first yoga class in Brooklyn set me on a path of personal growth and resilience, so too can a thoughtful, committed approach to investing lead to financial well-being, greater confidence and clarity. The key, in both cases, is to keep showing up, stay focused, and trust in the process.

Any opinions are those of Kathy Reisfeld and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Yoga and Finance

Fun Fact: Scott and I met because I wrote a post about finance and yoga back in 2005.  He was living in Michigan and practicing Ashtanga Yoga there and thinking about a move to NYC, where he planned to explore a career in finance, and he wanted to know what it was like balancing that with a daily yoga practice.  The short answer: totally possible, not always easy. We didn’t meet in person or start dating until 2007.  But that was our first exchange and I love that it was.

Yogis in Finance: I began working in finance the week after I graduated from college in 1997. When I first really dug into the depths of Ashtanga Yoga back in 2003, I had times when I really really wanted to be able to go to India for months at a time to study deeply at the source and ultimately teach. I didn’t feel like I could take that kind of time off from my career, as in my mind that would have meant quitting my job a financial advisor. I was even okay with the vow of poverty it would likely require. Because once I learned to really connect to my breath, I found that I don’t need anything else to feel deeply content. But I did feel despondent at the thought of abandoning my clients - it felt like it would be a selfish choice for me to make. And then the Dalai Lama happened to be giving a lecture at Central Park just months into this budding desire on my part and a lawyer asked him whether or not he should give up his career in law to pursue a spiritual path. The Dalai Lama told him that he shouldn’t… that the world needs lawyers who are on a spiritual path. And I took that to heart, because I think the advice applies to financial advisors as well.

I get surprised looks when I tell yoga people that I work in finance.  I’ve been told by people I’ve taught that I seem like more of a yoga teacher than a financial advisor.  I take this as a compliment, I guess.  I’ve had yoga friends hire me as their advisor and at first the transition can feel a little funny.  But the truth is I feel like there are so many overlaps between investing and a regular yoga practice.  And I wish more people felt like there was less of a gulf between the two disciplines.  Money is not intrinsically evil.  It is a means of exchange.  It is a means of growth.  And it is a means of opportunity.  If you invest with the same principles that you otherwise might choose to live, I do not believe that you are compromising your morality or integrity as a human being by exploring how you can make your money work harder for you and for others. 

Yes, investing generally means fueling corporate America and corporations around the world. Maybe that can feel a little suspect - all that pervasive corporate greed and focus on profitability. It is so easy to focus on the negatives of corporate America, but what about the positives?  What about the fact that the poorest of the poor have more opportunities and a higher standard of living here in this capitalist country than they would have had at any other time in history or in many other countries.  Investment drives innovation and innovation drives progress.  Do we as a human race need to learn how to take better care of each other and better address issues like income inequality?  Absolutely.  But can innovation be a key to that?  Of course it can.  And how can we help drive innovation?  By saving and investing. We don’t have to be perfect to do good.