Become a Stoic Investor and create a better and more consistent strategy. How can ideas from an ancient philosophy such as Stoicism help you become a better investor? The underlying principles of Stoicism help us live a more balanced life which is guided by reason and logic. It helps us leave our emotions out of the decision-making. To become a better investor, these are key elements to help us. This post will give you a short outline of stoicism, followed by five teachings to support you in your investing journey.
Stoicism is an ancient Greek and Roman philosophy based on having a virtuous life by living in accordance with nature. Its chief aim is to have a peaceful life. This philosophy is focused on using our reason and logic to make sure we have the proper opinions and choose the best action to take. The Stoics have us apply deep introspection to know and understand ourselves to the fullest. This way we know what is important to us and become a better version of the world around us.
Take these elements from this ancient philosophy and apply them to your investing strategies. The Stoic investor will be able to stay on their path and make decisions based on the truth and their needs. These needs and the possible outcome will also be more realistic, eliminating being influenced by a fear of missing out.
How does a Stoic Investor view Wealth?
Seneca, one of the most famous Stoics today, was one of the wealthiest in his life. He was often criticized for being a Stoic and having all these possessions. In some of his writing, such as his essay ‘On the Happy Life’ he defends himself, and philosophers in general, for having money. In that same text, he also shows us the true nature of money.
“I say that wealth is not a good; for if it was, it would make men good; as it is, since something that is found among wicked men cannot be called a good. I deny it this name. But that it is desirable, that is useful and confers great benefits on life, I do admit.”
Seneca, On the Happy Life, 24
Money or wealth doesn’t make us good, it does enhance our qualities. If we are good to begin with, we can become better and if we are bad, then it can make us worse. But Seneca does contradict Stoicism here a bit. He says it is desirable. Desire is something we need to be careful of. This can lead us to do things we might regret. It is, however, preferable. The Stoics include preferred indifferences, such as preferring wealth over poverty. But we need to understand the limits and make sure that it doesn’t start to control us. This leads us to the first idea to become a better investor.
What is in our control?
“That things have no hold on the soul. They stand there unmoving, outside it. Disturbance comes only from within – from our own perceptions.
Marcus Aurelius, Meditations, Book 4.3 i
Epictetus was born a slave and later became one of the best-known Stoics with his own school. We can still read his Enchiridion, his handbook, today. This handbook starts with the Dichotomy of control. Here he shows us what is in our control and what isn’t. External events aren’t under our control and everything that belongs to the mind is. When the Stoic investor invests in a company, she knows she can’t control the price of the stock. The sales of the company or product are out of our reach. We can do some technical analysis to determine a better entry point or moment to sell, but it is not under our control.
Yet, we can control how we look at the price action. We can make decisions on our opinions and determine how long we should hodl. There are certain tactics, like dollar-cost-averaging, we can apply because we know that these give us more peace of mind. Moreover, when we realize what is under our control, such as our ideas and views on the world around us, it is possible to eliminate some of the extreme emotions that might make us panic sell or FOMO at a peak.
Become consistent in our investments
“If you don’t have a consistent goal in life, you can’t live it in a consistent way.”
Marcus Aurelius
If you have learned some of the basics of investing, then you must know that the compounding effect is the money maker. The only way to make sure that this principle works is by being consistent. Follow your strategy, have your goals set, and stick to them. The stoics say that one must find his nature to live accordingly. You must know who you are and why you are investing. Is making money the only reason to invest, then you’ll never have enough? But if you are looking to improve your life and the lives of those around you, then you’ll be able to set a good goal.
With every action, you should ask yourself whether it is true to who you are. Are you buying a particular company because you believe in the product or because it is the latest hype? Knowing what you invest in is vital if you want to stick to your plan and survive the dips that will eventually come. Follow your nature and listen to this advice from the ancient Stoics. Set your goals and for every dollar you invest ask how it can help you get to where you want to be.
The Stoic investor takes responsibility
“Most people do not really want freedom, because freedom involves responsibility, and most people are frightened of responsibility.”
Bryan Magee, Popper. Psychology Press. p. 87. http://books.google.com/books?id=k9I9zY3wHRcC&pg=PA87.
Ok, this is not a Stoic quote, but it is the best to bring home the point. If you wish to create financial freedom, then it is up to you to take responsibility for it. No one will help you and if they do you should always check for yourself whether it is correct or the right timing. It is all up to you. Investing is fast and easy and you can do it all alone. That means that if you make money or you lose it, it falls on your shoulders. Take this responsibility and learn from your actions. If you give up after your first bad buy, then you’ll never make it. Or if you celebrate too hard after a major profit, it will be of short joy.
Remind yourself that you need to take charge. The Stoic investor relies on herself and examines her actions. There is no need to blame anyone else or to give away our power to others. Pointing your finger at others will not help you grow as an investor and it will not improve you as a person. Besides, any of the gains will feel like hollow victories, ones that came far too easy. Make this decision now, it is up to you to do proper research and stick to what you believe in.
Believe in yourself
“To stand up straight – not straightened.”
Marcus Aurelius, Meditations, Book 3.5
Building on the previous Stoic idea to be a better investor, it is important to believe in yourself. The first investment you make is in yourself. Wisdom is one of the Stoic virtues which they consider to be the highest good. Use this in your investing and even more in your life. Investing isn’t only about making money, it is about keeping it as well. To become a better person and investor you need to study, learn, and listen to everything around you. That’s where the money is made in the end. You control the buttons, but you need to know which ones to press.
If you want to rely on yourself, you need to train yourself. Like the old gladiators in the arenas, you are stepping into the feisty battlefield called finance. You must learn how to take a punch and keep moving forward. Sometimes it is smart to pause and analyze the best path ahead. Find a mentor or read books. Learn the basics of technical analysis and understand your financial means. Once you are the master of your own situation, you can walk into any market and make the best decisions.
Why did this happen to me?
“Whatever fate one man can strike can come to all of us alike.”
Publius, From Seneca, Dialogues and Essays, Consolation to Marcia, 9
During your time as an investor, you will make money, but you will also lose money. How you deal with that second aspect will decide whether you are here to stay or join the masses who gave up. What we must remember as we can learn from Stoicism is that nothing is personal. Money doesn’t care in which pocket it sits. It doesn’t like to be idle and prefers to move to those who are active. The same with fate, things happen to us because they happen. Not because the universe decided to give you a hard time.
There is no time to feel sorry for yourself. We have seen from the previous points what you can control and how you should act. Whatever happens to you then is neither good nor bad. That is what you make of it. A massive profit can be worse than a big loss. It all depends on how you deal with it. Don’t lament and ask yourself: “Why me?” But better tell yourself: “Why not me,” and move on.
Five Stoic ideas to be a better investor
Here we have five powerful stoic ideas to guide you to a profitable portfolio. There is more to Stoicism than what we have seen here, but so there is to investing. What goes for both is that you must use your head and follow your nature. Stick to your goals and learn what you can control. In the end, if you want to strive for financial freedom, then that falls completely on your shoulders. You either stand straight yourself or let everyone else keep you upright. The choice is yours, make the best of the opportunities you have right now.
If you are looking to improve your financial situation in life and get some ideas on what role investing can play in it, check out our Stoic Financial Coaching. We don’t provide any financial advice, but we can show you the options that are out there to work towards a better financial life.
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