Many years ago, I read a story of a Zen Master who was staying in the house of a patron which suddenly caught fire. The family of the patron started screaming and running out of the house urging the Master to do the same. To their surprise the Master ran in the opposite direction, in the house and sat down to meditate. After the incident, the patron asked the Master why he did that. The Master answered that everyone ran to protect themselves and be safe and he had done exactly the same.
You must be wondering how is this the same. I read the explanation, perhaps it was by Osho. In the face of the fire, chaos and danger we all act out of instincts, our habits and the Master had done the same except it was exactly in the opposite direction. Everyone ran out, the Master went in, to his center, the space within, where he knew for sure he would be safe.
The first thought that came to me was all this meditating stuff is fine, but the Master would have burnt to death and if he did survive it must be pure luck. But as I reflected on it, I saw and see the practicality and brilliance of the story and what we can learn from it. The Master did not react to the danger by running away from it; an action that has been programmed in our brain over millions of years, that we do it as a reflex action without consciously thinking about it. He centered himself, was in a space of complete calm and the inference we can draw from it is that he was able to take the most appropriate decision from that space. An amazing level of mastery makes such a thing possible.
In the world of investing, every now and then there is chaos, markets go topsy-turvy. Sometimes it crashes even as much as 40-50%. Your portfolio will appear to continuously fall and you will lose big time. Your brain interprets these losses as a threat, a survival problem and pumps stress hormones that drives you or compels you to sell and get out. Gripped by fear you sell and exit the market to save yourself. The other extreme, one of greed and in a state of arousal the brain pumps another hormone and we act on it, grabbing and devouring in a manner that is best described as have lost our senses. And actually, we have.
How do we get to a state of mind that when investing, we always, instinctively out of habit not react but center ourselves like the Zen Master and take decisions from the space of calm? The answer I have for you is to be Process-centered, take investing decision by following a process.