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In this episode, I’m thrilled to welcome Darius Foroux, author of The Stoic Path to Wealth: Ancient Wisdom for Enduring Prosperity. Darius regularly writes about productivity, Stoicism, and wealth building on his website, but here we dive deep into how stoic philosophy can transform your investment strategy and help you achieve financial freedom.
Stoicism, an ancient Greek philosophy, teaches us to focus on what we can control and to let go of what we can’t. It’s about finding inner peace through managing our reactions and emotions. In the realm of investing, these principles can be incredibly powerful.
If you’ve ever felt overwhelmed by market volatility or unsure about your investment strategy, this episode is for you. Join us for a compelling discussion on how adopting a stoic mindset can help you navigate the complexities of investing with greater confidence and clarity.
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Importance of Investing and Challenges Investors Face [1:57]
Darius describes his lifelong interest in the stock market, but how his discovery of stoic philosophy marked a pivotal moment in his investment journey because it allowed him to be more consistent. There may not be a more important quality for an investor.
As I point out in our conversation, we all need to invest to grow our money at a rate greater than inflation. We can’t just squirrel away all of our savings in cash.
Darius agrees, sharing his perspective from growing up in an immigrant family that lived paycheck to paycheck. For him, investing is the most proven path to financial freedom. He acknowledges that many people find investing daunting, especially with the plethora of conflicting advice available online. Darius stresses the importance of starting early and remaining consistent to avoid the frustration of slow financial growth.
Managing Emotions and Staying Consistent [6:40]
To appreciate the ideas Darius shares, it’s important to understand what stoicism is and is not.
Stoicism teaches individuals to focus on what they can control and to accept what they cannot. This philosophy is particularly relevant to investing, where market movements are often beyond an individual’s control. By applying stoic principles, investors can better manage their emotions and maintain a long-term perspective.
Darius recounts his early experiences with investing, where losses led to emotional turmoil and self-doubt. Stoic philosophy, which focuses on controlling what you can and ignoring what you can’t, was instrumental in helping him overcome these challenges.
Darius emphasizes that every investor must deal with volatility and the constant noise from social media and news. He points out that understanding the regular ups and downs of the stock market can help investors remain calm during turbulent times.
By adopting a stoic approach, investors can develop the discipline needed to stay the course, even when faced with short-term losses. Darius notes that successful investing is less about finding the perfect strategy and more about remaining consistent with whatever strategy you choose.
The Role of Education in Financial Success [13:33]
As we discuss the importance of education in achieving financial freedom, Darius advises against focusing solely on the money you currently have or earn. Instead, he encourages listeners to invest in their skills and personal development. By improving your abilities and becoming better at what you do, you can increase your earning potential over time.
We both agree that there are many holistic benefits of lifelong learning. Darius argues that continuously developing new skills and gaining knowledge can significantly impact your financial success. By focusing on becoming the best version of yourself, you can increase your value in the marketplace and earn more over the long term, but there is also great fulfillment from continuous learning.
Education is not just about financial gain; it also contributes to personal satisfaction and brain health. Engaging in lifelong learning can help create new connections in the brain, leading to improved cognitive function and overall well-being.
Understanding the Stock Market [19:03]
In the name of education, we discussed some of the stock market fundamentals that Darius covers in his newest book.
One of the most important ideas, in my opinion, is that the value of companies is driven by their earnings. The reason the S&P 500 has consistently grown over the past century is that these companies have continually increased their earnings. Understanding this principle helps investors see why the stock market tends to rise over the long term.
You can look back at any period and see that stock returns are comprised of earnings per share, cash returned to shareholders (via dividends or stock buybacks), and changes in valuation. Changes in valuation are influenced by collective market psychology, which can swing unpredictably and is rarely “in balance.”
It’s also important to realize that losses are a natural part of investing and should be viewed as temporary setbacks. We both agree that short-term losses should be seen as part of the journey toward financial growth. By adopting a stoic mindset, investors can remain focused on their long-term goals and avoid making emotional decisions that could harm their portfolios.
Balancing Life and Investing [28:58]
The Golden Mean, or the middle way, is a key idea in stoicism. This philosophy advocates for a balanced approach to life, where individuals can enjoy good things while also enduring hardships. Darius believes this balance is crucial for successful investing. He argues that investors should manage their desires and find contentment with what they have, rather than constantly chasing after more.
This part of the conversation led us to discussing the importance of optimizing for return on time rather than just financial returns. We’ve both seen examples of people spending a lot of time and energy trying to earn a little bit more money, often at the expense of their well-being and relationships.
I find it particularly saddening when people become obsessed with their finances and investments, especially when it is something you can so easily outsource. By focusing on what truly matters, such as spending time with loved ones and pursuing meaningful activities, investors can lead more fulfilling lives.
Darius expands on the idea of balance further by sharing his own experience of managing desires through stoicism. He explains that spending time online often triggers thoughts of wanting more—whether it’s a new car, a bigger house, or the latest hot stocks. By applying stoic principles, Darius brings himself back to a balanced perspective and reminds himself to be content with what he has. He believes that this mindset is essential for building long-term wealth and avoiding the traps of greed and excessive spending.
Practical Wisdom and Strategies for Investors [35:22]
In discussing some of the practical applications of stoicism in life and investing, Darius emphasizes that stoics taught that living an honorable and virtuous life should be the highest aim. He believes that by focusing on what you can control and maintaining a balanced perspective, you can make better decisions for yourself, your family, and those around you. This approach not only leads to financial success but also to a more fulfilling and meaningful life.
For those interested in learning more about stoicism, Darius suggested the following books: A Manual For Living by Epictetus and Philosophy as a Way of Life by Pierre Hadot. I’m personally a fan of Ryan Holiday’s work on stoicism. These resources can help individuals develop their own understanding of stoicism and apply its principles to their personal and financial lives.
By adopting these strategies and perspectives, listeners can not only improve their investment outcomes but also lead more balanced and content lives.
Resources:
- Darius Foroux
- The Stoic Path to Wealth: Ancient Wisdom for Enduring Prosperity by Darius Foroux
- Stoicism Definition
- A Manual For Living by Epictetus
- Philosophy as a Way of Life by Pierre Hadot
- Ryan Holiday
The Long Term Investor audio is edited by the team at The Podcast Consultant
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