Investing like a stoic is a topic I’ve had on my mind for a while. Ever since I started my investment journey and when the Stoics entered my life. Don’t get me wrong, I’m far from an investment guru and I’m no financial advisor, so don’t take this as financial advice. My goal is here to show some of the very basics of investing and how a philosophy will help you build a solid strategy. Investing your money is one of these things that scares a lot of people, as it did to me. But once you get to investigate a little and see what it is all about, you’ll see that it’s possible for everyone to get started with investing.
As I say that, I understand that a lot of people lose money and that not everyone might feel they are in a position to invest. But my other posts like Budgeting Like a Stoic and Become Financially Independent Through Stoicism, can help you improve in other aspects of the financial aspect of your life. In this post, I want to make the connection between investing and Stoicism and how they can reinforce each other. We’ll look at what investing is and go over some of my personal rules when it comes to setting your money to work. Along the way, we will also look at our relationship with money.
Is money in control?
The number one rule in investing is to have our emotions under control. How more Stoic can it get than this? A major aspect of Stoicism is to learn to control our emotions and apply reason to the events that happen around us. And the investment world is a playground for our Stoic practices. Especially because we are putting our money where our mouth is.
And let’s face it, money has become a pivotal commodity in our society. It can get us on a high when we receive more than expected and bring us down low when it disappears. The Stoics would then ask us to reflect on who is in control. It seems that in many lives, money is the principal factor that drives us into action, good or bad. Investing like a Stoic could help take that power away from it and keep us on the right path. How is that possible? We will dig deeper into investing.
“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 good, I deny it this name. But that it is desirable, that it is useful and confers great benefit on life, I do admit.”Seneca, Dialogues and essays, On the Happy Life, 24
Invest in yourself and society
There is a difference between investing and trading. We know trading from the movies, with everyone shouting and screaming. Nowadays, trading can be done from our homes and it is accessible to anyone. Yet, it is not investing. Trading is all about short to medium-term action. Trying to time the market and using all the tools available to read the charts and price action. And although there are some success stories, the majority lose money doing it this way.
This happens even faster when they use leverage trading. Which means that you invest with money borrowed from a broker. If it goes up, it goes faster. But when it goes down, you can lose a lot more than you had put in. This is not my way, I’m an investor. Investing is long-term, by that I mean years, even decades. And we can apply these principles to many other aspects of life. I don’t only invest in money, but also knowledge, myself, and the people around me.
Money, a prefered indifference
Money has a strange quality, it likes to move. Even when it appears to be sitting still, it either grows or shrinks in value. The Stoics teach us to appreciate it when we get it, but when it wants to go, to accept that. Not to let it become our master, but rather use it as the tool it is supposed to be. If we can give it that little push to work for us, that would be even better. And that’s how investing comes into view.
Stoicism can help us follow some rules we need to set for ourselves to keep us on track and consistent. That’s the way to go with investing, consistency will yield the best results. It might sound boring and it can be, but in the long term, it can give us the freedom we are looking for. The Stoics view gaining advantages like these as preferred indifferences. It all depends on what we have to give up to gain them.
What to invest in
The first step is to figure out what to buy. There are many options out there, from risky to safer options. This is for you to find out what suits you best and what you feel you can handle in the long term. Do you want to go for a specific company because you like their product, or is an index fund a better fit? Here you need to do your research to get to know the product in-depth. Remember, this is a long-term thing, so you better know what you’re getting involved in. Basing yourself on rumors of friends or people in the know is not a solid strategy. Reduce your anxiety by understanding it and knowing how it works. Yes, it takes some work, but once it’s set up, you’re done.
My personal strategy
My personal investment strategy might not be the safest, as I chose to go for cryptocurrencies. But I never used leverage, which meant that if it all were to go to zero, I’d only lose my initial investment. My thought process in this went like this: I saw two options. Option one: Work for others for another 30-plus years. Option two: Invest my money into a risky asset like crypto without debt and jumpstart my investment portfolio this way.
Then when I reach my goals, I’ll move it into index funds for the long term. And if it fails, then option one will give me 30 years to recover my money. Which is the track I’m already on. Again, this is my way of doing it. You need to ask yourself what you are comfortable with. I have a high tolerance for risk because I have a clear goal and in the meantime, I’m working on other things. So I don’t put all my eggs in one basket.
Where to invest
Once you know what to buy, then you need to know where to do that. There are many platforms online that can help you. Depending on your geographical location, some will work better than others. To see what is available for you, you could use broker chooser. This guide can help you get started to find the one you’re most comfortable with. Since this is a foundational part of the process, take your time. It will be possible to move if you have to, but that will cost you money. Which is something we wish to avoid with this investment strategy, moving things. Once you buy it, the plan is to leave it there and not touch it.
When to invest
Now we arrive and the question of when to buy. Marcus Aurelius talks about the cycles in life, and they also exist in the financial markets. They will go up and they will go down. And if you hold long enough, then you’ll find yourself in a profit. Historically, the cycles all move up in the bigger trend. When you buy isn’t that important if you hold it for a long time. But you should research and feel comfortable with keeping your money there.
Index funds are the safest way to go about it. And if you want to buy at regular intervals, you can apply a strategy called Dollar Cost Averaging (DCA). This means that you buy a specific product, with a certain amount at a set time of the month, quarter, or year. Doing so will improve the average buying price. The highs and lows don’t matter, the average will work to our advantage.
“Look at the past – empire after empire – and from that, extrapolate the future: the same thing. No escape from the rhythm of events.”Marcus Aurelius, Meditations, Book 7.49
Setting goals like a Stoic
Many factors determine the outcome of your investment journey, but consistency is key in this one. Again, cue the Stoics. If you invest your money, knowing you might need it soon, will increase the anxiety you’ll feel when prices go down. But if you’re able to say goodbye to the money as you buy new shares, you’ll detach yourself from it. The most successful investors are those who forgot they bought in the first place and remember it years later. You can keep track of it, but be mindful of your emotions and feelings towards it. Have specific ideas for the money if it reaches certain levels, that will help you to sell. Because one rule of thumb is that you haven’t lost or gained any money unless you sell.
The last part is deciding when to sell. This all depends on you. If you are going for early retirement or as an addition to your pension, then you might want to wait until you reach that stage. If you could use the money for something, and while it is in profits, then that might be a good time to withdraw them. Setting clear goals and objectives is important and then sticking to them. These things need to be considered at the point of buying. Give your money a purpose and you’ll find it easier to invest like a Stoic. And when you set these goals, keep Seneca’s advice in mind.
“You ask what is the proper limit to a person’s wealth? First, having what is essential, and second, having what is enough.”Seneca, Letters From a Stoic, Letter II
Be a Stoic Investor
The reason why I want to address this topic is that it can help you get ahead in life financially. And Stoicism can help you improve your chances of being successful. Apply all the tools the Stoics gave us. Think about what could happen if you lost the money. If that causes too much stress or might put you into trouble, then it’s best to wait. Remember that you can’t control the markets, go along for the ride and control your thoughts on the price action.
Keep the bigger picture in mind, what are your goals, and follow the plan. But most of all, be consistent. Anytime you move your money or your stock around, that will cost you money. Doing less is more. There are a lot of things to learn on this topic, but you’ll be a lot better off if you teach yourself how it works. Working with financial advisors or active mutual funds can end up costing more money than you think. Make sure you do your own research and be a Stoic investor. Because if I can do it, then why can’t you?
Wealth is not a good
My final thoughts on this, and I’ve learned this throughout my journey, is that money shouldn’t be the driving force. It should be used for the tool that it is. True happiness or contentment isn’t found in wealth and riches. You need to find that within. Money can help you do things, but if the lack thereof causes you anxiety, then you need to work on other internal things first. Make sure you give it its rightful place in your life, as an indifferent preference. If it is there, that’s fine. But as Seneca said:
“such things should be despised, not to stop himself having them, but to avoid worry when he does have them; He does not drive them away, but accompanies them to the door, if they leave him, as an untroubled host.”Seneca, Dialogues and Essays, On the Happy Life, 21
“Wealth is not a good.”Seneca, Dialogues and Essays, On Providence, 5