The Zen of Investing

If investing your money is scary or gives you anxiety, you need to learn the zen of investing. You have to let go of the outcome- worry gets you nowhere.

Most of the time, you should ask yourself: “How much of my life did that cost?

A $30 item may cost 1-3+ hours of your life, after you account for life-hours you lost commuting, packing lunch and ironing your office shirts.

But there’s one exception. DO NOT contemplate “hours of your life” when you think about money you lost investing.

I know, I’m recommending serious cognitive dissonance. Here’s why.

Investing as a Zen Practice

Investing is best approached as a zen practice: one that’s marked by peace, detachment and acceptance.

Investing is risky. We know that truth, although sometimes we like to deny it. We like to pretend we can enjoy gains without losses.

Stress and strife comes from that denial. We feel disappointment when reality doesn’t align with our expectations.

Our sheer sense of helplessness compounds the disappointment. After all, the markets are outside of our control. We can’t place an angry phone call to the Fed when stocks tumble. We can’t have Mommy talk to the teacher and make everything okay.

Investing peace comes from embracing the risk, accepting our lack of control and letting go of the outcome. Yes, risk is real. You will bust your butt to earn real dollars that will disappear into the ether. And that’s okay.

Relax. That’s just the nature of investing. Let it go.

There are no returns without risk. They keep each other in balance. Risk and return are two halves of the same body; they cannot be separated.

The sooner we quit denying half of the equation, the more peace we’ll feel with our investments.

The Adolescent Crush

When our investments rise, we cheer. But when they drop, we panic. The emotional yo-yo is exhausting – like a middle school crush.

The emotional yo-yo is an investor’s worst nemesis. It causes both panic selling and “buying at the peak.”

Instead, take a zen approach: be neither happy when your investments rise, nor sad when they fall. 

Just observe what happens, but don’t emotionally respond to it. If you feel yourself reacting – (and you will) —  re-center yourself. Release any hopes, fears or expectations that you hold. Let go of what happens next.

If you frame your losses in terms of the hours you logged at a computer screen to earn that money, you may become too risk-averse.

If you frame your gains in terms of the hours you no longer need to sit in front of a computer screen, you may become too aggressive.*

Instead, ignore your losses and gains. Let go of the compulsion to check your balances. Tell yourself “this is only temporary,” regardless of whether your portfolio is soaring or sinking.

Shrug when your net worth rises, and shrug when it falls.

This is my ultra-simple investing plan:

1)   Earn more, save more, invest more.

2)   Choose investments with risk levels you accept, such as index funds or rental properties.

3)   Let go of the outcome. Accept that whatever happens, happens.

Focus on the amount you invest each month (within your control) rather than the performance of those investments (outside your control).

Don’t discuss your investments with anyone other than a spouse, mentor or trusted fellow zen investor. The “masses” will urge you to panic and/or celebrate, and you should do neither.

Embrace detachment from the outcome. You’ll feel more at peace, and you’ll also be a better investor.

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P.S. *There is one benefit to framing your gains with regard to the hours that you no longer need to sit at a computer: it can push you to contribute to your investments more aggressively, as opposed to choosing riskier investments.  Again, this is “within your control” vs. “outside of your control.”

P.P.S. Obviously, risk isn’t one-size-fits-all. Duh. There’s a massive difference between buying a total stock market index fund vs. buying crude oil futures. You’re sophisticated readers; you already know that.

Thanks to Pink Sherbet Photography / Flickr for today’s photo.


  1. says

    The moment we start thinking about the losses in our portfolio (or even the potential losses), we fire up loss aversion in the back of our heads. In general, people would rather risk more to get to break even than they would to increase their winnings. The commonly used scenario is a coin flip. Imagine that I gave you a coin flip for $100. If you win the flip and I offer to do double or nothing, chances are good that you’ll walk away, even if I offer better odds on the second flip, such as you earn $105 if you win again. On the other hand, if you lose the first flip, you’re much more likely to go for broke (so to speak) and flip again to try to get back to your original $0 starting point.

    It’s the same with investments. If you focus too much on your losses, then you’ll take much riskier investments to try to “catch up” with where you mentally thought that you should be, and the next thing you know, you’ll be investing in penny stock newsletters and pouring money into the OTCs or your cousin’s new deli in western Greenland.

  2. says

    If we focused on our losses, we’d be out of the investment game entirely. In our first few years out of college, we had the opportunity to buy into a few different deals with a group of experienced investors. These all looked like “can’t lose” deals at the time (pre-crash), and in total we sunk in $xxx,xxx. One of them went 100% belly-up, the others floundered but still could potentially get us some kind of return (that is, return OF [some of] our money or if we’re really lucky, a return ON our money). Since then we’ve focused on tangible, income-producing assets (primarily rental real estate) which are generally doing great. We don’t sweat the losses, and while I’d never put a label on it, “zen” is a very good way to describe our attitude about past losses and the potential for more losses in the future.

  3. says

    You gotta have a zen mindset or else you’ll start trading on every market downturn. I could accept my losses once I realized that no one else knows what’s going to happen either. It’s freeing.

  4. says

    I only invest money I can afford to lose and don’t check the investment every week, rather every quarter or less. It helps to be detached, otherwise you go crazy with any small market swing. For rental properties as long as they are cash flow positive I don’t check the value until I consider selling.

  5. says

    I agree that it’s important not to become too attached to the outcome. This can be a challenge. But, it’s also important to learn from one’s mistakes. Don’t beat yourself up but remember where you went wrong before repeating something. Better yet, do some planning, learn from the mistakes of others when possible, and accept that you will make some mistakes.

    • says

      Right on, Tiffany! I think accepting the fact that you’ll make mistakes is crucial, especially for novice investors. Many people start investing by thinking that they’re invincible, that they’ll experience only returns and no losses. When someone tells me about a loss, I advise them to think of it as “tuition.”

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