Jonathan K. DeYoe, CPWA, AIF, is a Lutheran seminarian turned Buddhist academic turned financial adviser. Jonathan is a senior VP and partner at EP Wealth, and his Mindful Money organization is focused on financial education and coaching for folks who don’t have access to traditional advice. He lives in Berkeley, California.

How does this book differ from your first book, Mindful Money? 

There are 3 steps (and only three steps) to personal financial success. They are planning (or thinking it through); evidence-based (simple, mindful) investing; and mindful patience (non-judgmental persistence in the face of the unknown). My first book, Mindful Money, described in detail and provided exercises to support thinking it through (the first step). This book, Mindful Investing, describes how to create a simple, low-maintenance portfolio that can be managed in less than 2 hours per year.

The combination of thinking it through (planning) and keeping it simple (investing) is a powerful combination of lessons and exercises for people who want to get control of their money and limit the space it takes up in their lives.

Once you’ve read both books, done the exercises, and are following the lessons, all that is left to become wildly personally (and financially) successful is a regular (daily, minimum 10 minutes) meditation practice.

What does Mindfulness have to do with Investing?

Mindfulness – the non-judgmental awareness of the present moment as it is experienced through our senses, thoughts, and feelings – is a powerful tool in any space where a reduced stress response or improved focus is beneficial. There really isn’t another element of modern life that so thoroughly permeates every hour of our days as does money. Money is the great enabler, it is our broadly adopted signal of “success,” and it is often presented as the primary solution to both personal and cultural ills – “if we only had more money, we would be able to _____.” Money (and investing), in a culture as wealthy as ours where inequality is rife, is always at the top of the list of human stressors.

Stressful, however, does not mean complex. Money and money management, were it not for all our cognitive and emotional biases or for their central importance in our lives, is actually quite simple. It is the desire for and the mistaken beliefs about money that make it such a difficult area to think about for most people. Mindfulness is the singular tool that enables people to remain calm when the world around them is going crazy. This calm has a profound effect on their investing lives.

In Mindful Money and Mindful Investing, we strip away all the junk and noise and we highlight the simplest path to becoming better at money that ANYONE can employ.

Will investing mindfully lead to better outcomes? How?

Investing mindfully leads to better outcomes in three ways.

First, it can improve investment outcomes. A calm, non-reactive, process-driven approach to investing is the only way to consistently improve your relative performance over time (decades). It is when you STOP trying to predict what is coming next that you stop being subject to all the cognitive and emotional biases that lead to many of our financial mistakes. When you appropriately allocate your assets to stocks vs. bonds; broadly diversify around the globe; and then JUST rebalance once per year, you experience the highest probability of long-term outperformance. By eliminating the need to respond to everchanging market and economic conditions, you eliminate the guesswork and the biases that lead to bad choices and worse outcomes.

Second, it requires less time and energy to invest mindfully. A simple, mindful approach to investing, where most decisions are made at the outset, holdings are fewer and more broadly diversified, and implementation is as automated as possible can save the investor 100s of hours / year. All that recaptured time can be repurposed for better uses. No one on their death bed wishes they would have spent more time at work. Even fewer wish they would have spent more time managing their portfolios. Time is our most limited resource, we should spend it where it will make the greatest difference to our happiness and contentment.

Third, it can improve the experience of investing. A simple, mindful approach to investing might be difficult at first, but – just like meditation – it gets easier the longer you keep at it. 

Whether your approach is mindful or not at the outset, you will immediately notice the negative comparisons (we are hard-wired for it). You will notice that some other portfolio construction or method is doing better this month or this quarter. You will wonder why and how you can improve your own portfolio outcomes (you are only human). Inevitably, you will discover it is doing better because it is “overweight” a top-performing asset (a particular stock or sector). 

The simplest portfolio – the one where all the equities are held in a single fund or ETF (for example, Vanguard’s VT – Total World Stock Index or iShares ACWI – All Country World Index) – already has exposure to every sector, every geography, and every size company. Any addition or subtraction will add an overweight or an underweight and add another thing to track and attend to. It will be obvious that you are making things more complex when you go from one holding (that holds everything) to multiple holdings some of which are more concentrated. You will see the transaction cost if there is one. You will see the tax cost when you do your taxes. You will have an opportunity to become mindfully aware that you are veering off course, adding complexity, increasing cost. You will remind yourself that no-one can predict and that a simpler portfolio with lower cost is likely the better path.

With the simple portfolio, you learn to override all the ideas that would lead to new holdings and to simply add more to your all equity portfolio when you have money to add. Over time, this decision gets streamlined until after a couple years it is so automatic that you don’t even think about it anymore. You just put the money to work as you always have and you’re done. You don’t even need to track it, you just leave it alone as it works.

The more complex your portfolio, the easier it will be to convince yourself to make changes to take advantage of this new info. If you have 12 portfolio holdings and your small-cap growth piece is underperforming another small-cap growth holding, you can convince yourself that you are optimizing by making a change. You can convince yourself that this is an improvement. If you own 40 individual stocks, the problem of needing to make the short-term changes compounds itself. Every time you look at the portfolio, you will see a piece that isn’t doing well and you will want to make a change. It becomes a challenge to convince yourself to stay the course in this design.

Of course, the more small tweaks you make, the more important making small tweaks becomes. If you make too many, you will eventually be lost and a return to simplicity will be an impossibility for you. You will forever need to read the economic commentary and review the analyst reports and recommendations for the securities you own. None of the additional work and attention will be additive, but all will be required.

There seems to be a new crop of investment books every year, what makes Mindful Investing unique?

I guess, just start with the title. None of the others put “Mindful” in there. And, I’d say that makes ALL of the rest, well, wrong. Ha ha ha.

You are absolutely right, there IS a new crop of investing books every year. The vast majority of them are about different forms of real estate investing (which somehow still received the lion’s share of our investing attention). And ALL of them – the real estate books, equity/stock market books, private business investing books, or fad-investment-of-the-day books – offer a path towards “outperformance.” The goal is always better investing. “Better” is always defined as higher returns.

We live in a timing and selection culture where the emphasis is always on choosing better investments and making better timing decisions – as if those decisions were the important decisions. They are not.

There is a large (and still growing) body of academic research that fully debunks the idea that we can use timing or selection to improve our investment outcomes. We don’t need to read any of the research to understand that there are no facts about the future. The future is unknowable – full stop. Because no one knows what is coming next, we cannot improve our investment returns with better predictions. If we decide to predict, then at best, we will get lucky sometimes and unlucky other times. 

Those who do well in one period of time due to a particular market stance often do poorly the next period of time due to that market stance now being “out of favor.” Just as a broken clock is right twice a day, every investment belief will have its time in the sun – just before it returns to the shade. No one has been able to harness timing and selection to improve long-term outcomes in a predictable and consistent way.

The thing that makes Mindful Investing different from all the other investment books is that we start by admitting we don’t know (can’t know) the future and we build our investing process on top of the inability to know.

The thing that sets Mindful Investing apart from the rest is… humility.

Why would you, an advisor, want to teach people how to do it themselves?

There are a few reasons. First, I honestly want everyone to do well. I have capacity for maybe 100 face to face clients as long as I have excellent support in the office. And I have capacity for maybe 200 Mindful Money “members” who get me in a group coaching setting a couple times a month. So I can help 300 of the 350 million people in the US on my own. That’s leaves a lot of room.

Second, financial advice is a luxury service. It’s expensive and most people don’t have any access. The book is primarily for them. My clients fall in the top 5% of wealth in the country. There are advisors who work with less complicated clients, but I have fought pretty hard to keep my minimums reasonable and to create access for folks who don’t have it elsewhere. This is what my books are about, it is also what my podcast, blog, and coaching programs are about. Advisors can’t help everyone who wants help and, for some, the cost of advice is too high. They don’t deserve the help any less.

Third, the advisory world is constantly changing. In the next change, I want financial advisors to start admitting that their “circle of competence” doesn’t include building better portfolios. Because no one knows the future, no one can say whose portfolio today will outperform tomorrow. We can’t manage our financial lives by managing our investment performance. In fact, we can’t manage our investment performance at all. Advisors, whose primary role with their clients is investment management (and who are not doing any life or financial planning, aren’t doing any coaching, or solving tax and estate issues) are overcharging their clients. If they wish to earn their fees, they must deepen their services. 

If my book finds the clients of advisors in this last group, I hope it stimulates them to find better advice or maybe do it themselves for awhile… I’m happy to help.

Do you talk about SRI/ESG investing in Mindful Investing?

Absolutely. To invest with social responsibility in mind is purely a matter of “tool selection.” Tool selection is the final step in the process and the first appendix, Investment Tools, A short List, includes SRI/ESG choices.

The most important issues of portfolio design – asset allocation, diversification, and rebalancing – can easily incorporate either a general idea about “sustainability” or the entire ESG package simply be selecting investment tools (ETFs and mutual funds) that meet the individuals needs for social responsibility.

Keeping with the general purpose of the book, however, we are only including the most easily accessible and lowest-cost options. There are ways to be more deeply aware of SRI/ESG, but they are more expensive and express more particular SRI/ESG goals than would be appropriate for a broadly educational book.

What are the “core” beliefs” of Mindful Investing?

In Mindful Investing we have 4 core beliefs:

1. Plan appropriate asset-allocation
2. Broad global diversification
3. Regular re-balancing
4. Low-cost

Once we have a portfolio in place that incorporates these 4 things, we are done. We rarely change it other than to add more money or rebalance it when it gets out of whack.

But, we live in a market-focused and performance-driven world. Market participants believe that they should be focused on making better timing and selection decisions to improve their investment outcomes. Nothing can be further from the truth.

No one can consistently add value by predicting the overall market, or any specific investment. No one can handicap future relative performance. Yet 95% of financial media is focused on making better investment selection and market timing decisions.

Mindful Investing is the opposite. We are goal-focused and planning-driven. Knowing where you are, where you are headed, and how you will get there is far more important in determining successful outcomes than is your market outlook. 

By sticking to the core four beliefs, investors recapture time that would be misspent on investing and still have excellent investing outcomes.

Who is Mindful Investing for?

If you picture an old Ven Diagram – two overlapping circles – Mindful Investing is meant for all people within each of the circles, but it would be especially interesting to those who find themselves in the overlapping space.

The first group Mindful Investing is written specifically for are people who don’t have access to good financial advice. Maybe they don’t have enough assets to meet firm minimums? Maybe they don’t know who to trust? Maybe they can’t find an advisor who understands their story? The reason doesn’t matter; it’s for people who have the sense that they are on the outside of the financial services world. 

I almost quit 3 different times in my first 5 years as a financial advisor for Wall Street firms in the San Francisco Bay Area. I hated the investment sales game and I really didn’t like most of the people engaged in the game. As a 3-decade meditator and student of Buddhism, I have felt like an outsider for much of my career – even while working on the inside.

The second group Mindful Investing is written specifically for are those who don’t look at the financial section. They know they have to save and invest, but they want the process of investing to take the least amount of time and energy from the rest of their lives. Mindful Investing lays out a simple process that can be employed by anyone with only a couple hours per year spent on investing.

This second group might also have a general distrust of all the Wall Street marketing departments and investment salespeople. They have heard the story so many times that they don’t believe that anyone can pick better investments. They would be right about this, and still not really know what to do about it. 

Where those two circles overlap, we find people without access to the financial services world who also put financial concerns at the bottom of their to-do lists. They know they have to deal with it, but they don’t want to spend more time than they must and they don’t know where to turn or who to trust.

What’s more important mindfulness or investing?

Both are very important for different reasons.

In the first section of Mindful Investing I define “investing” and lay out the purpose, as I see it, behind investing. To the extent that one agrees with my “Why” behind investing and isn’t just after a big pile of money to buy new stuff, we can see investing is incredibly important for our family’s future. There are three basic things we invest for: security, responsibility, and legacy. I would say these three and all the details they entail are very important reasons to invest.

But, at the end of the day, the reason we advocate for keeping investing simple and the reason we teach a process of Mindful Investing, is because the complexity and effortful standard for investing doesn’t actually produce better outcomes. 

Investing IS super important, but it is done best when it is kept simple. More time and effort does not improve investing outcomes.

Whereas Mindfulness – the non-judgmental kind attention to the present moment as it is experienced by our senses, thoughts, and feelings – can be incredibly powerful and important when applied to all areas of life. Further, unlike investing, the more time and energy you spend in your mindfulness practices, the greater the effect you will have on all these aspects of life.

Both mindfulness and investing are very important, but if you had to choose one to spend more time and energy developing, you should choose mindfulness.

In the book, you seem to push equities/stock/shares a little bit… why?

Fixing your income in a rising cost world is financial suicide.

Equities work. Equities are the best tool to produce the most predictable long-term results for investors. They are exceedingly easy to use, and everyone has access to them (regardless of gender, race, religion, creed, etc.). Equity – be it publicly traded stocks or shares of private businesses – is the single greatest tool for compounding wealth that has ever existed on earth. I push equities because I am passionate about them. 

People who have a generalized fear of equities simply do not understand them.

There are two category errors that I see when I am speaking with investors: we don’t save enough and we don’t hold a high enough percentage of our portfolios in equities.

The first is a planning error – we don’t plan, so we don’t know how much we need to save, so we don’t save enough early enough to fulfill our plans once we make them. Mindful Money (my first book) was aimed at this first error. 

Mindful Investing deals directly with the second error – not holding enough equities. This basic error stems from a mistaken definition of “money” that leads to a mistaken definition of “risk” which leads most investors to avoid the one tool – equities – that has the highest probability to get them where they want to go keep them there.

In the long run, the only sane definition of “Money” is purchasing power. Currency (the thing most of us call money), therefore, is NOT money. It’s just currency, and it loses some of its purchasing power every day because of inflation.

Risk, properly defined, has less to do with the short-term loss of currency (what we experience as stock market volatility) and more to do with the long-term loss of purchasing power. Over 4-5 decades preparing for retirement and 3-4 decades in retirement, inflation is the dominant risk factor.

Enter Equities. Equities (the partial ownership of the great companies of the US and the world) have been far more effective than Bonds (or other fixed-income investments) at preserving and enhancing purchasing power. This is why I prefer owning equities over pretty much any other investment.

Equities superior long-term return is a function of (is directly caused by) their greater volatility. But volatility ≠ risk, because all historical declines have been temporary, while the long-term advance of equities has been permanent. 

Most people fail at investing because they avoid equities generally, and when the stock market falls, they sell the few equities they held. The key to success in investing is to buy equities, buy more equities as they go up in price, buy more equities when they fall in price, and buy more equities when the prices seemingly stagnate. The trick is to buy and buy and buy and hold – give the businesses you own the time to become more successful and let compounding work its magic. 

Volatility fades; return endures.