Yoga and Investing
/By Shelley Murasko
Over the years, I’ve become particularly fond of yoga as an exercise. After too many miles of distance running in my 20s, yoga ended up being a nice contrast to the years I spent pounding the pavement.
I practice a form of yoga called Bikram Yoga. Held in a studio heated up to 100 degrees, the teacher leads us through a series of 26 postures over the course of an hour. As you can imagine, it’s not hard to work up a sweat!
In one session, I can put my strength, flexibility, and cardiovascular system to the test. While all the classes are challenging, there’s one instructor who really pushes his students to hold poses longer and with more effort. When I leave his class, I feel like I might collapse on the way to the car. Now that’s a workout!
Requiring a minimal amount of poses, “hot” yoga is simple but not always easy to adhere to. In many ways, a dedicated yoga practice reminds me of disciplined, diversified, low-cost index investing. As master investor Warren Buffett once said, “Investing is simple, but not easy.”
Simple at First Glance
On the surface, yoga can seem super simple. In fact, if you walked into a hot yoga studio while the heat was off and someone quickly showed you the 26 postures, you might think, “What’s the big deal? I can do this in my sleep. They call this exercise?”
Furthering this idea of simplicity, yoga requires a minimal amount of gear. You need only a yoga mat, towel, and big bottle of water to take part in a typical class. In fact, you don’t even need to go to a studio. You can perform yoga by following along with poses from a book or online course. While a heated studio is nice, you can get similar benefits in a non-heated room.
To reap the greatest rewards, however, attending a class at least three days a week is recommended. Dedicated yoga students make it a daily practice over several years. Instructor-led yoga, where poses and their benefits are explained in great detail, lead practitioners to work their heart, lungs and muscles more deeply.
Over time, yoga students memorize the sequences of the various postures. Yet most find they achieve greater benefits with an instructor who can guide them and offer hands-on adjustments versus working at home alone.
Similarly, investing on one’s own may sound simple at first. Just choose a brokerage company and a few funds and away you go, right? Sure, you can read a basic investing book and pick up enough information to become a do-it-yourself investor. For some unique individuals, investing on their own might work. However, the overall data tells us that having a financial advisor will usually lead to better investing results.
DIY-based Investments Tend to Underperform
Studies conducted by Dalbar showed that typical DIY investors earned an average 2.5% return on their investments from 1999 to 2019, barely beating inflation. A 50% stock/50% bond portfolio would have returned 5.5%.1 The simple aspects of smart investing, such as portfolio diversification, dollar cost averaging investment dollars, and steady asset allocation, are often not followed.
DIY investors might also find themselves doubting the simple nature of their investment approach. Questions like the ones following might arise that challenge their courage and consistency:
Do I have enough funds?
Are the funds high quality?
Do the fund managers invest in their own funds?
What will the Dow do this year?
Can these low-cost funds really get me to a good retirement?
Why does my neighbor seem to have it so easy with his GameStop® pick?
It’s only after years of investing that a person comes to appreciate the nuances and complexities of structuring an investment portfolio with high-quality funds. After all, it takes time to acquire a deep understanding of how to achieve not only return but reliability of return. Educated investors also must learn the importance of putting systems in place for every decision. This helps lessen emotional and behavioral tendencies that can eat away at returns.
Over time, a dedicated investor learns how to enhance return by staying diversified, focusing on structure, and keeping expenses low — not by relying on luck or “shooting from the hip.” This takes years of disciplined investing that is closely monitored.
These keen investors know how small and large company stocks interplay. They can identify gaps in performance between value and growth stocks. They have systems in place to take advantage of market drops, and they follow their systems with a high level of discipline.
In addition, these investors have likely reflected deeply on how much global exposure they really need, and they know that investing is about more than picking good funds or stocks. They understand why investing works best within the context of a current financial plan, and they update their financial plan consistently to ensure investments are in alignment with cashflow projections.
A Disciplined Approach Leads to Greater Rewards
A sensible investing discipline is highly effective and, over the long term, capital markets will reward patient investors. Historically, over decades, a broadly diversified U.S. stock fund has averaged about 9% to 10% annual return while a U.S. small cap value fund has averaged closer to 11% to 12%.
To achieve a solid return, a diversified U.S. stock investor must endure stock market drops of 30% to 40%. With experience, an investor embraces volatility as an opportunity to rebalance or get more money into the stock market. They see the market drops as a door opening, saying “Come on in! It’s a good time to enter and make some money.”
An investment-grade bond fund investor would have attained about 4% average return over the various time periods. The level of volatility here is much less.
When reviewing investment results like the “One Page Report” by Morningstar, you’ll see that a basic 60% stock fund and 40% bond fund like the Vanguard Wellington (VWENX) has averaged 10% return over the past ten years. Thus, a $10,000 investment would have grown to $25,000. Investing in a fund like this is a simple, yet very effective approach.
There’s no one investment strategy that will perform well every year. But over enough time, with a good dose of courage to stay the course during tough times, capital markets have rewarded investors.
A yoga practitioner who is dedicated daily to performing the 26 key poses in a heated studio over several years will also reap rewards. In this case, the return is a moderate blood pressure, steady blood sugar control, muscular strength and flexibility.
In fact, a study done by the NIH concluded that Bikram Yoga improves the ability to process sugar, reduce cholesterol and fat and improve bone density. Most practitioners also report lower levels of stress and improved sleep as byproducts.2
Advisors Make It Easier to Stay Dedicated
Adhering to an exercise program like yoga over many years is never easy. Whether it’s time, cost or energy, there are many factors that can make it difficult to remain dedicated.
There have been times where I wanted to give up yoga because I felt I was no longer progressing. After falling out of a posture or feeling extra stiff in that same spot, I have asked myself, "What’s the point?"
This really became obvious during COVID times when the yoga studio was closed for months on end. I was left to my own devices to continue my practice at home. My first attempts of DIY, video-led yoga led to boredom, in which I switched to just walking or jogging each day. While great exercises, walking and jogging primarily offer benefits only to the legs along with a cardio boost. They also can occasionally result in sore hips and knees.
After starting to feel stiff and sore from running, I gave yoga another attempt and overdid it. I rushed into headstands one day and came away with a sore neck for weeks. Being at home made me feel like I could push my limits more than I should, and I suffered the consequences.
Investors can feel the same way if they experience a series of false starts that lead to lackluster results. A common practice is putting money into what may be considered a good fund or stock. If a stock doesn’t show glowing results after a month or two, though, DIY investors often ditch it and move on to the next hot idea they read about in the newspaper — without taking the time to understand why the stock didn’t perform as expected.
This cycle of chasing performance is very common among DIY investors, and it can destroy returns. These same investors might have done a better job staying the course or, at least, ensuring no major changes were made if they had an advisor guiding them.
That’s because an advisor who is tapped into the pulse of the market can often explain its behavior based on historical data. For instance, perhaps a certain market segment is temporarily trailing. An advisor would be able to point this out to an investor and provide advice on how to manage a portfolio with this in mind.
If another investment was necessary, the advisor could guide the client to find the right investment without giving up on the investment category at the wrong time.
While yoga and investing are simple in principle, they can be rather challenging in practice — especially when it comes to sticking it out through thick and thin. Yet the only way to achieve the optimal health or wealth benefits is to stay disciplined and give your particular approach time to show results.
Buffett once said that “achieving his first million was the hardest thing to do.” The right approach and help from an advisor can make it easier.
Whether you’re attempting your first million or are simply curious about an investment question, I’m here for you. Don’t hesitate to reach out.
Sources:
JP Morgan Chase. (March 31, 2021). “JP Morgan Chase’s Quarterly Slides, Guide to the Markets.” Pg. 80. DALBAR study of investor behavior based on data from mutual fund flows recorded annually.
Hewette, Zoe. (Oct. 5, 2015). “The Effects of Bikram Yoga on Health: Critical Review and Clinical Trial Recommendations.” NCBI – U.S. National Library of Medicine, NIH. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4609431/.
