Are Happy Investors Better Investors?

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Aug 1, 2014 11:55:24 AM

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happy investorsI'll be out of the office for a few days, so I'm revisiting some of my past posts. (Today's originally appeared in July 2012.)

One of the great perks of my position at Commonwealth is the chance to talk with experts in a wide range of fields. A couple of years ago, at our Chairman’s Retreat, we heard from a speaker who specialized in the psychology of happiness.

I have to admit, I was skeptical. Yet, as he spoke, I was won over by his approach to the topic: what you can actually do to make yourself happier and what that means for your life. The idea is to focus on small changes that are easy to implement but capable of making measurable improvements in your life and career. The gentleman’s name is Shawn Achor and the book is The Happiness Advantage, which I highly recommend.

Small steps, big rewards

I don’t want to recap the book here, but one point worth noting is the power of habit.

Since hearing Achor’s presentation and reading his book, I’ve been focusing more on developing good habits over time. Exercise is one; meditation is another. My most powerful new habit, though, is doing daily gratitudes. Every morning, I write down at least three things I’m grateful for.

Achor cites evidence that this type of activity can lead to significant performance increases. In my case, I believe it’s done that, as well as making me more focused and generally content with my life.

Another approach, suggested by Kol Birke, my Commonwealth colleague and a financial behavior specialist, is to look at what’s going right. After talking with Kol, I added a “going right” list to my morning routine, and I think it will also prove valuable over time.

Exercises like this can temper our obsession with the day to day and encourage us to take a bigger-picture view—whether we’re thinking about our portfolios or our family life. Achor’s suggestions are well worth a look, both in an investment and noninvestment context.

Upcoming Appearances

Tune in to Bloomberg Radio's Bloomberg Businessweek on Friday, February 28, at 3:45 P.M. ET to hear Brad talk about the market. Stream the show live at https://www.bloombergradio.com/, listen through SiriusXM 119, or download Bloomberg's app, Bloomberg Radio+.

Tune into Yahoo Finance's The Final Round on Thursday, March 12, between 2:50 and 4:00 P.M. ET to hear Brad talk about the market. Exact interview time will be updated once confirmed. Watch at finance.yahoo.com

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