I’ve been asked a lot how I invest when the market is being volatile. The answer is that I use principles that I stumbled upon years ago in the ancient school of thought called Stoicism.
I hope you’re open to going down this rabbit hole as I believe practicing Stoicism is something that can change your life for the better, especially when it comes to becoming a profitable investor.
If you already know what Stoicism is, you can jump down to the 4 Cardinal Virtues or how Stoicism can help you with investing.
What Is Stoicism?
Stoicism is a school of thought that flourished in Greek and Roman antiquity, but it’s still relevant today.
According to The Daily Stoic, Stoicism is “a philosophy designed to make us more resilient, happier, more virtuous and wiser – and as a result, better people, better parents and better professionals.”
Today many use the word “stoic” to describe someone who seems to be indifferent to emotions like pain, pleasure, grief, anger or joy. But this is not accurate.
A stoic person still does feel pain, pleasure, grief, anger or joy of course. The difference to other people is their reaction to it.
Stoicism’s Perspective on Control
One of the key principles of Stoicism is the idea of separating the things you can control and the things you cannot control. This is called the dichotomy of control.
While Stoics accept the fact that they don’t always have control over their environment, they’re convinced that they do have control over how they approach and react to things.
This concept should be familiar to anyone who’s read about how mindset affects our perception of control.
This dichotomy of control decreases emotional reactivity, which can be helpful in many situations – also when investing.
The famous Stoic Epictetus said, “Where then do I look for good and evil? Not to uncontrollable externals, but within myself to the choices that are my own…”
The Origins of Stoicism
Stoicism was founded by Zeno of Citium, a once-wealthy merchant who one day found himself shipwrecked in Athens around 304 BC, more than 500 miles away from home with no money or possessions.
Most people would be devastated, cursing their awful fate and misfortune. But not Zeno.
With not much else to do, he started reading about the great Greek philosopher Socrates. Intrigued, he started discussions with other philosophers in Athens and eventually started speaking about philosophy in public.
Zeno’s teachings happened in a decorated public colonnade called “Stoa Poikile”, literally meaning painted porch. This is where Zeno laid the cornerstone of the school of thought called Stoicism.
He supposedly later joked about his shipwreck saying, “I made a prosperous voyage when I suffered shipwreck”, which again is a great illustration of his Stoic mindset.
Famous Stoics that followed Zeno were Seneca, Epictetus and the Roman emperor Marcus Aurelius.
The 4 Cardinal Virtues of Stoicism
While accepting the world as it is, Stoics always try to be and become their best selves by preparing themselves for an uncertain future.
To achieve this, they follow the four cardinal virtues of Stoicism.
1. Wisdom
Wisdom means the ability to navigate complex situations in a logical, informed and calm manner.
2. Temperance
Temperance means the exercise of self-restraint and moderation in all aspects of life.
3. Justice
Justice means treating others with fairness even when they have done wrong.
4. Courage
Courage means to face challenges with clarity and integrity and not just in extraordinary circumstances, but facing small daily situations too.
Practicing Stoicism Principles Throughout Life
I innately used many Stoicism principles throughout life before I even knew what it was. Let me show you how I used them despite having less than ideal circumstances.
What I Couldn’t Control
I grew up dirt poor, farming on the plains in Colorado. When I say dirt poor, I think that might be an understatement.
We lost our house, we never had any new stuff, and we ate what we grew. Eating out was like the highlight of the year when we went to a buffet because they were the cheapest.
I went to school in Walmart or K-mart clothes and shoes always smelling like shit and covered in dirt. My parents turned to drugs (probably because of the miserable conditions) which led to abuse.
Because of the abuse, the state took me away from my parents and sent me to foster care. And that was no picnic because the foster dad liked young boys…
I’m not telling you this to get sympathy, but to show you the power of Stoicism. All this stuff I just mentioned was beyond my control, so what good would it do to dwell on it?
Focusing On What Was In My Control And The Wisdom Principle
School provided me with opportunities to get away from my miserable home life.
I joined the football and basketball teams which got me out on weekends, and I was always the first to volunteer for any after school activities when I didn’t have practice.
I also developed my brain at school so I could go off to college and escape the misery.
Basically, I used whatever talents I had plus learned as much as I possibly could, so that I didn’t have to go back to the farm.
This is the wisdom principle.
The Temperance Principle
I didn’t kill my parents, and believe me, I thought about it. And I never lashed out to hurt any other people or animals like they did.
I walked in the trees and knew them by name. You read all the time about how abused kids turn into monsters. I refused to become like my parents.
Instead, I was laid back because I knew I could make it out of that situation.
The Justice Principle
I had many friends, most of which you would’ve never expected a stinky hick to have — cheerleaders, jocks, nerds, outcasts, disabled kids.
I always treated everyone with respect and fairness. It wasn’t their fault (or mine for that matter) that my home life sucked ass. Sure there were fights with some people, but I never treated them poorly after we fought.
The Courage Principle
I’ve always had a strong moral compass, which has led me to live a life full of integrity. I don’t steal, never did. I hate lying, seldom if ever do I lie (ask Carmela about this ha).
Above all of my morals is always a strong desire for absolute logic (sometimes to a fault). I feel clarity in logic.
How Stoicism Has Led Me To My Purpose
Life has been one hell of a ride, but using Stoicism principles, I made it out of an abusive childhood and poor rural town in Colorado.
I moved to Pennsylvania to attend college where I graduated and then got a job working for the state.
More challenges arose and I navigated them much in the same way. This life process has most importantly led me to investing and to van life.
I found what I was most passionate about because I chose to focus on the things that I could control instead of wasting time and resources focusing on the things I couldn’t.
Enough about me. Let’s move on to how you can use Stoicism to become one hell of an investor.
How Can Stoicism Help With Investing?
So how does Stoicism apply to investing, and why do I feel it may be one of the best philosophies to implement to become a successful investor?
One of the main reasons most investors are unable to create wealth is because they’re unable to control their emotions.
There’s no room for emotions in investing and when you are in an emotional place, there’s no room for logic.
My experience also mirrors this. Emotions lead to bad financial decisions that cause the loss of time, control and capital.
How Stoic Investors Feel About Money
Before we discuss the principles of a Stoic investor, we need to highlight how people who practice this philosophy truly feel about money.
The Stoics had a unique perspective on money and wealth. While they recognized the practical necessity of money in daily life, they viewed it as indifferent to true happiness and moral virtue.
According to Stoic philosophy, true happiness, and fulfillment were not dependent on external possessions or wealth but on cultivating wisdom, virtue, and living in accordance with nature.
The Stoics believed that external things, such as money and material possessions, were neither good nor bad in themselves but rather indifferent.
They argued that it was the individual’s attitude and use of money that determined its moral value. The key was to maintain an attitude of detachment and not become excessively attached to wealth or possessions.
The Principles Of Stoic Investing
Focus On The Things You Can Control
In investing, many factors are beyond your control, such as market fluctuations and economic conditions.
Stoic investing encourages you to focus on factors within your control, such as your investment strategy, asset allocation, and risk management.
By directing your energy toward the aspects you can influence, you can make more rational decisions and avoid unnecessary stress.
Maintain Emotional Detachment
Stoicism emphasizes the importance of emotional resilience and detachment from external events.
It means avoiding emotional reactions to market fluctuations, such as panic selling during market downturns or chasing after speculative investment trends driven by FOMO.
Stoic investors aim to maintain a calm and rational mindset, making decisions based on long-term principles rather than short-term emotions.
Embrace Market Volatility As An Opportunity
Stoic investing recognizes that market volatility is an inherent part of investing. Rather than being fearful of market downturns, stoic investors view them as opportunities to buy assets at discounted prices.
They understand that market fluctuations are temporary and that over the long run, well-diversified portfolios tend to grow in value.
Focus On Intrinsic Value
Stoic investors prioritize the intrinsic value of investments over short-term market trends.
They seek to understand the underlying fundamentals of companies or assets they invest in and make decisions based on long-term prospects rather than short-term market sentiment.
By focusing on intrinsic value, stoic investors aim to make more rational and informed investment choices.
Accept The Uncertainty Of Outcomes
Stoicism teaches acceptance of the things that are beyond our control. In investing, this means acknowledging that there is inherent uncertainty in predicting market movements and investment outcomes.
Stoic investors recognize that despite their best efforts and research, there will always be an element of unpredictability.
By accepting this uncertainty, they can maintain a balanced perspective and avoid excessive attachment to specific investment outcomes.
Cultivate Discipline And Patience
Stoic investing emphasizes discipline and patience. It encourages investors to stick to their long-term investment plans, avoid impulsive decisions, and resist the temptation to time the market.
Stoic investors understand that successful investing requires consistency, perseverance, and the ability to weather short-term fluctuations in pursuit of long-term goals.
So in a nutshell, when you implement the principles of Stoicism you’ll become a better person and investor. Now that we’ve identified how a Stoic views the market and investing, let’s address a couple other points.
You Also Need The Following For Successful Investing
To Actually Be Invested
Knowing how to do something and taking action are two different things.
According to Pew Research, a mere 41% of Americans under the age of 35 have direct or indirect investments in the stock market.
And only 58% of people between 55 and 64 are invested in the market which is the other age group that should be fully invested in income producing assets.
So basically, if you’re invested in any capacity, congrats. You’re way ahead of a majority of other people.
Investing Is About Perseverance And Understanding Risk
Without perseverance and risk understanding, it’s impossible to be a long-term investor.
Every time you make an investment or trade, you have to deal with the risk of losing money, missing out on major opportunities, and accepting your returns…whether they’re positive or negative.
If you’re afraid of these two things, you’ll make life unnecessarily hard for yourself—especially when there’s a market downturn. During those times, there’s not much you can do to change the overall market.
If you’re close to retirement, you can pull out of the market. But other than that, you just have to navigate and learn to invest your way through it.
Some investors blame their own judgment or skills when they lose money. So they think they need more study and analysis or they may try to find answers in the market. But instead, they need to accept that sometimes there’s just no one to blame.
If we want to build wealth over time, we need to keep investing to benefit from the power of compounding. We can’t allow our emotions about short-term fluctuations to get in our way.
The biggest threat to an investor is to stop investing. After the 2008-2009 crash, many people refused to invest and missed out on one of the biggest bull markets in recent history.
When the Co-vid market crash of 2020 happened, again many people refused to invest and missed out on one of the most profitable periods in recent history.
I hope you’re starting to understand how implementing these principles in your investing journey can help maximize your returns.
To Sum Things Up
Stoicism can greatly improve not only your life, but your investing results. To embody the principles of Stoicism, we always need to stick with our plan and carry on no matter what.
Fear (whether it be FOMO or simply fear of losing money in a rocky period) usually bites you in the butt cheeks. Using a rationale, logical approach and staying the course over time will provide the best results for investing.