Meir Statman: Your State of Mind Influences Your Investing Success

Editor’s Note: Our Enterprising Investor podcast features intimate conversations with some of the most influential people from the world of finance about the topics that matter most to investment professionals. This post summarizes the key talking points from a conversation between the show’s host, Mike Wallberg, CFA, MJ, and Meir Statman.

In this episode of Enterprising Investor podcast, we delve into the relationship between money and happiness, and how your state of mind can influence investing success. Our esteemed guest, Meir Statman, a professor at the Levy School of Business at Santa Clara University and author of A Wealth of Well-Being: A Holistic Approach to Behavioral Finance, shared his insights on the broader aspects of financial well-being and its interconnection with life satisfaction.

Statman emphasized that while money is necessary for supporting a family and ensuring financial stability, it is not sufficient for overall happiness. Life well-being encompasses various domains such as family, work, health, education, and religion, and it’s crucial to balance these to achieve a holistic sense of well-being.

The conversation also touched upon the generational differences in risk tolerance and portfolio construction. Statman emphasized the importance of striving for long-term goals and taking calculated risks that can lead to rewards, such as investing in education or career changes. He advised against the pursuit of quick riches through speculative investments like Bitcoin or lottery tickets, advocating instead for a disciplined and science-based approach to investing.

Statman shared his simple portfolio strategy, which is based on the dual goals of avoiding poverty and aspiring to be rich — not just in monetary terms, but in overall well-being. He discussed the benefits of diversification and the power of compounding over time, suggesting that investors should focus on being with the market rather than trying to beat it.

In closing, Statman offered advice to his younger self and to the younger generation: sacrifice some present comfort for future well-being, take useful risks, and remember that enhancing the well-being of others can enhance your own well-being.

If you liked this post, don’t forget to subscribe to Enterprising Investor.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image courtesy of Nick Webb. This file is licensed under the Creative Commons Attribution 2.0 Generic license. Cropped.