The Stoic Path to Wealth Summary

"What lies in our power to do lies in our power not to do." – Aristotle. How can ancient wisdom help us achieve financial stability and peace in a volatile market?

1. Investing Is Vital for Wealth Building

Investing isn't just an option for building wealth; it's essential if financial independence is your goal. Relying solely on a paycheck, even a high salary, won't lead most people to long-term prosperity. That’s because inflation erodes the purchasing power of money over time. Without investments to counter this loss, you'd essentially be losing money by simply holding onto it.

Over the last 40 years, inflation in the United States has been approximately 3% annually, a rate which can significantly devalue cash saved under the proverbial mattress. In contrast, the S&P 500 index has offered an average annual investment return of more than 11%. This means that a thousand dollars invested in the stock market in 1980 would be worth nearly $30,000 by 2022, while the same amount in cash would only maintain the spending power of $240.

The best way to start is to invest consistently in reliable, proven assets like a low-cost ETF that tracks the S&P 500. However, long-term success isn’t guaranteed by the strategy alone. As markets rise and fall, investors must learn to overcome two dominant emotions: fear when markets decline and greed during market booms.

Examples

• 1980 to 2022, inflation reduced $1,000 saved in cash to a purchasing power equivalent to $240.
• $1,000 invested in the S&P 500 during the same period grew to almost $30,000.
• Famed investor Warren Buffett consistently advocates the predictable value of index funds.

2. Emotional Mastery Is as Important as Financial Knowledge

For many, the biggest barrier to successful investing isn't a lack of financial knowledge but the inability to manage emotions. Fear and greed can lead to irrational decisions like selling investments at a loss or chasing risky high-return ventures. Stoics understood that emotions become stronger when indulged, making it essential to recognize and check these impulses early.

Darius Foroux shares his personal experience with the 2008 stock market crash. Having started his investment journey with $2,000, he tragically lost more than half of it after a market downturn. The emotional impact left him paralyzed, too afraid to invest further despite knowing the long-term benefits of staying the course. The Stoic philosopher Seneca provided clarity by comparing unchecked emotions to faults that grow with indulgence.

To gain financial stability, you have to cultivate calmness and self-discipline. Mastering emotions allows investors to stick with their plans even during challenging market conditions or periods of loss.

Examples

• The 2008 financial crisis caused fear-driven investors to sell at significant losses.
• Seneca’s teachings emphasize regulating emotion to prevent poor decision-making.
• Foroux eventually broke free of fear and resumed investing by applying Stoic principles.

3. Stoicism in a Nutshell: Control the Controllable

Stoicism teaches focusing on what is within your control while gracefully accepting what isn’t. Most of life’s events – including market volatility – are outside our influence. What you can control are your thoughts, decisions, and actions. This mindset helps investors to stay grounded and resilient through economic highs and lows.

Zeno, the founder of Stoicism, turned to philosophy only after losing his wealth in a shipwreck. This hardship helped him understand that external circumstances are secondary; the real “wealth” lies in character and virtue. Similarly, Marcus Aurelius considered life’s difficulties as “material for virtue to act upon.”

For investors, developing virtues like wisdom, courage, and self-mastery is key. Markets will crash, and investments will underperform at times, but our reactions to these challenges determine our long-term success.

Examples

• Zeno lost everything in a shipwreck but found strength in philosophy.
• Marcus Aurelius framed misfortune as opportunities to exercise virtue.
• Investors who stay disciplined in volatile times often see better long-term returns.

4. Skill Development Lays the Foundation for Investing

Capital for investing often requires earning money first, which comes from building skills that provide value. Self-reliance and continuous learning form the foundation for financial freedom. Darius Foroux stresses identifying your inherent strengths, mastering them, and developing them into unique skills to earn and grow wealth.

Take Jesse Livermore, a high school dropout who built a stock market fortune through his ability to predict market movements. Even during personal and financial losses, he relied on skills, not luck, to rebuild his wealth. His consistent learning from both failure and success allowed him to amass a fortune during the Great Depression.

By investing in personal skill development, you create a safety net. Money can be lost, but knowledge and abilities remain permanent assets.

Examples

• Jesse Livermore’s trading skills helped him recover multiple financial setbacks.
• Foroux emphasizes a skill-building “springboard” approach: focus on strengths, learn from experts, and refine your unique style.
• Continuous self-improvement ensures long-term earning potential, even amid economic downturns.

5. Control Greed to Avoid Investment Pitfalls

Greed tempts investors to make high-risk decisions in pursuit of quick rewards. This often leads to losses that could have been avoided with a steadier approach. The Stoic emphasis on moderation helps counteract the tendency to endlessly seek more at the expense of stability and peace of mind.

Jack Bogle, founder of Vanguard Group, embodies this principle by advocating for “enough.” Even as his firm grew to manage trillions, Bogle focused on maintaining modesty and providing value, rather than accumulating personal riches. This philosophy nurtures disciplined, level-headed investing.

When investors aim to avoid losses rather than chase outsized returns, their portfolios tend to grow sustainably over the long run.

Examples

• Jack Bogle lived modestly despite leading a trillion-dollar company.
• Framing desires like “making 20% returns” into better goals such as sound decision-making aligns actions with controllable outcomes.
• Focusing on portfolio protection ensures steadier growth over time.

6. Long-Term Success Relies on Consistency

Switching investment strategies often hurts more than it helps. Chasing the latest trends frequently leads to poor timing and missed opportunities. Instead, successful investors stick to a proven plan even during times of doubt or external distractions.

ETFs that track indices like the S&P 500 require minimal management but yield consistent annual returns on average. The real test comes during market downturns, where patience and adherence to strategy are critical. Over time, consistency results in the magic of compounding returns.

Examples

• Sticking to an S&P 500 ETF through ups and downs generates steady growth.
• Frequent strategy changes can lead to higher losses than following a single plan.
• Legendary investors like Peter Lynch credit their success to long-term consistency.

7. Resilience Through Moderation

Success isn't only about how much you accumulate; it’s about how well you manage desires and strike a balance. Moderation in daily habits, including those unrelated to finance, builds the discipline needed to avoid impulsive decisions.

Simple practices like controlled eating or limiting expenses cultivate restraint, sharpening your ability to focus on long-term goals over instant gratification. This moderation helps investors navigate temptation, such as riskier investments that promise quick rewards.

Examples

• Marcus Aurelius taught the value of simplicity for mental clarity.
• Controlling food and spending habits fosters discipline for other life areas.
• Reining in greed during market booms avoids further risks.

Takeaways

1. Reframe your investment goals: Focus on actions within your control – like thoughtful decision-making – instead of obsessing over outcomes.
2. Build skills as permanent assets, ensuring financial growth in both calm and turbulent economies.
3. Moderate greed and cultivate virtues to approach money matters with steadiness and peace of mind.