Learning about investing from Yoga

Technical analysis best reflects this, as the whole study involves about patterns - current and past, the possible trends, the recurrence of past patterns, etc. The various patterns formed by the price along with the volume allows the analyst to anticipate a possible market movement for a stock from a similar price action in the past

Success in investing is possible and fortunately there’s no one way of doing things. One could follow fundamental analysis or technical analysis but either way if they don’t have a grip on themselves, it could turn futile.

When investing in equities, one must just not know about the stock or company but also the business they operate in, the macro environment, the regulatory and government policies, the future trends, and even one’s own risk tolerance. I would like to draw parallel to the concept of pancha kosha in Patanjali Yoga to comprehend investing.

Per this philosophy, the human being is understood to have five layers or covers or sheaths called pancha kosha, each representing the level of awareness that veil the true self within. By exploring each layer, the practitioner moves closer to oneness or union, the ultimate objective in yoga and the very meaning of it. The five kosha are: Annamaya Kosha, Pranamaya Kosha, Manomaya Kosha, Vijnanamaya Kosha and Anandamaya Kosha.

Annamaya Kosha could simply be expressed as the physical body i.e., the organs, the bones, muscles and skin that makes up the body. This is the outermost layer or the exterior, the most tangible aspect of human body. Yoga helps to get aware of one’s body before trying to better it.

While employing fundamental analysis, an investor should seek for the most material information about a company. This includes the balance sheet, their assets & liabilities,the products/services, their geographical exposure or presence, the buildings, factories and other similar tangible information. This helps to assume the nature of the company, if it would experience seasonality, does it have enough reserves to counter any downturn and wither a stiff competition, etc. For someone employing technical analysis, price is the most prominent and immediate parameter that determines the collective market information of a stock.

Pranamaya kosha simply means the prana in the body i.e., the vitality, the energy in the body. The practice of yoga in this kosha would concentrate on the energy in the body and how it flows within. It governs all the physiological activities of the body from pumping blood to breathing and to digestion of food, etc.

The prana of any organization is the cash available. The cash flow analysis and the free cash helps us gauge how profitable their operations are. The income statement could throw light on this. Of course, the various ratios, for instance, the debt to equity, debt servicing, etc. help us assess the health of the company. Volume of the stock determines an equivalence of prana for a technical analystexploring a stock. It defines how liquid the stock and indicates the demand-supply - a pseudo of the interest among the traders.

Manomaya kosha is the mental or emotional state of the body per the yoga sutras. This third sheath corresponds to our mind expressed as feelings, thoughts and sensations which forms the thought process.This is the psychological or emotional channel that has formed over the period through intentions, thoughts, actions and experiences that ultimately form our behavioral patterns, habits and character traits. This allows us to receive, process information from and respond to the market.

Technical analysis best reflects this, as the whole study involves about patterns - current and past, the possible trends, the recurrence of past patterns, etc. The various patterns formed by the price along with the volume allows the analyst to anticipate a possible market movement for a stock from a similar price action in the past.

Behavioral finance aptly covers this part of the subject where despite the rich information available, how an investor’s behavior impacts the outcome. This behavior is rooted from their biases which are a manifestation of their beliefs and experiences that form a spiral, compounding into behavioral attributes that cloud their decision making.

Anandamaya Kosha is simply the bliss body i.e., the deepest and subtlest layer representingjoy, happiness and spiritual connection. This must be felt and experienced and can’t possibly fathomed by a thinking mind. This transcends beyond the physical, energetic, mental and intellectual layers that realizes their true nature and experiences a state of oneness with all.

In investing, this refers to being conscious about the various biases yet to remain stoic in trying situations. It meansremaining open to information, that at times, could be contradicting to our own thesis. Verify this new set of information to course correct and not remain dogmatic about your philosophy. This is a result of cultivating practices that are consistent and performed with discipline.

In conclusion, investors have to draw a plan, avoid biases even while being open to new information, irrespective of it being in-line with their thesis and ensure that this forms a continuous process to succeed.

(The author is a partner with “Wealoticy Analytics”, a SEBI registered Research Analyst and could be reached at [email protected])