We want more money, but we also want peace of mind at the same time. Those two things don’t always go together.
While the economy keeps growing despite cataclysmic events and, as a result, the market keeps going up, there are a few challenges when it comes to successful long term investing.
Challenge 1: Volatility
Investing in stock market is difficult because the market is so volatile. Prices constantly go up and down, which plays into two powerful emotions fear and greed. We fear when the market is going down. We get greedy when the markets start going up and feel the urge. If you maintain composure in spite or the fluctuating nature of market you will be successful.
Challenge 2: Consistency
You have literally hundreds if thousands of options to invest your money. Picking the right investment strategy is hard. Successful investing comes down to turning out irrelevant information, having the strength to stick to your strategy, and resisting the urge to follow other opportunities.
Challenge 3: Prior Losses
Losing money in the stock market is common. Trading stocks for the short term profit always sounds great, but by the time people find out the odds are stacked against them, they have probably already lost enough money that they are fed up with stocks. The truth is that professionals know that investing is not about theory or knowledge; it’s about managing your emotions.
Build Wealthy by Applying Ancient Wisdom
Stoicism is a philosophical school of thought founded by Zeno of Citium in Athens. The foundation of stoicism is the principle of knowing what you can control and what you can’t. By simply focusing our energy on the what we control and not worrying about what we don’t control, we can attain inner tranquility.
The goal is to live in the present moment, free of worries about the things you can’t control. The idea is that a good behavior leads to a good life, a life of contribution, loving relationships, and peace of mind. The stoic path to wealth starts with investing in our skills and earning money. When we can distance ourselves from our money, and accept the idea of potential loss, we can allow it to compound.
How This Book Helps You to Build Wealth
While investing philosophies helps you to get best return on your money. Stoicism helps you to get the best return on your time. The Stoic Path to Wealth does both. It helps you to build wealth through stock market while protecting your time and sanity. You will find a combination of ancient wisdom and practical advice from modern successful investors. Every chapter starts with a profile of an investor. Even though you might know about these investors, in this book you will uncover new insights about their lives in terms of Stoicism.
Lessons from these investors are put into terms of Stoic Philosophy. Every chapter also includes a small segment called “Meditate on this”. These are stoic thought exercises meant to practice your ability to control your emotions. Finally at the end or the book, you will tine Stoic Investing Techniques. The better you manage your emotions, the more consistent you are, the better you can execute your investing strategy, which is what makes you wealthy.
PRINCIPLE 1: Invest in Yourself
Valuable skills are better than money. While its possible to lose money, the skills you have acquired will always remain with you, ready to be utilised for generating income. You create value, and in return you are financially rewarded.
Work with your natural abilities. You will be able to provide more value if you focus on what you’re already good at.
Learn from the best. If you decide learning anything, commit to only learning from the best. When you study from the best people in any field, you notice how everyone has their own unique way of dong things.
Break free from your mentors. At some point in your progress you will start to tie everything you learned into a unique way of putting your skills to work.
Do your best without over exerting yourself. You must protect your mental health and get enough rest. Don’t burn out.
Everyone perks up at the idea of a shortcut to wealth. You find advice and schemes to get rich quick. But none of the prominent investors you will read about in this book have taken shortcuts. The media cycle runs on hype and forecasting catastrophe, which influences short term fluctuations. As a stoic investor, you will understand these narratives and don’t react to them. Always keep the principles of investing in mind as its easy to get caught up in the daily news cycle of the stock market.
Consistency pays off: Investing is a habit
“When bad things happen to good companies, it must be viewed as a buying opportunity rather than a bailout.”
The problem is that most investors are not consistent. What’s the best way to form a habit ? By making it so simple that its almost impossible not to do it.
Law 1: Start Small
“It takes a lot of money to make money” That’s not true. The whole point of investing is to turn a bit of money into a lot of money. Investing is not a goal, activity or a task; its a habit. Its something you do regularly. Even if you make plenty of money its smart to start with small sums to get used to the fluctuations of the stock market. “Keep Adding to your portfolio, slowly but steadily, as you get on with life.”
Law 2: Make it Automatic
Automating your finances removes your emotions from the equation. When you invest certain amount of money, avoid changing the amount when the stock market goes up or down. Pick an amount you can invest every single month to. Avoid picking a number that makes it impossible tor you to cover your cost of living.
PRINCIPLE: 2 Accept Loss
Get comfortable with losses. By adopting this mindset and becoming comfortable with short term loss, you can ensure long term success by staying committed to your investment strategy. Develop the skill of embracing temporary setbacks. You might get the urge to sell because there is so much negativity. But a stoic investor realizes it’s nothing to worry about. Whether you are a passive investor or a stock market picker, simply invest more when the market is going down if you have opportunity. The fear of loss is normal. But listening to that fear and not investing will keep you from building wealth.
Avoid Losing All Your Money
Its vital to steer clear of significant loses that you can’t come back from. How do you know what the correct price is for a stock ? Its such a complex task that every investing expert and finance professor has a different opinion.
One of the most popular models uses the price-to-earnings (P/E) ratio of a company, which measures the current market value of a company’s stock price compared with its earnings per share (EPS).The stocks with the highest P/E ratios are generally the ones that go up the fastest, which is why valuation models usually don’t say anything about the short-term movement of a stock.
The idea is that if you learn the skill of valuation, you will make good investments. But most of us don’t have the desire to spend hours everyday evaluating stocks. We don’t have the passion or interest to read a company’s balance sheet and annual report. It is crucial to invest money you won’t miss for a decade or more. If you invest with money you need for expenses or large purchases, its likely you’ll be forced to sell your stocks before you allow your money to compound exponentially. You can avoid that by investing only money you don’t immediately need.
Greed is not good
We want more of everything: money, opportunities, vacations, food, experiences. But the endless pursuit of more leads to our destruction. When you appreciate that you can have enough of anything in life, you will experience inner peace, You will enjoy what you have. Avoid excess and aim to live a balanced life. When we live according to the middle way, we avoid financial ruin. Moderate your habits. Living a balanced life.\
PRINCIPLE 3: Compound your money
Let your money do the work. When you know that you are consistently investing in the stock market, you know it’s only a matter of time before your wealth grow exponentially. This knowledge will give you satisfaction when you invest. When you invest and allow your money to compound, you are truly improving your future. Always keep the costs of investing in mind like fee. Do things that give you energy. Life’s too short to obsess about chasing money. Invest. But also do things you truly enjoy.
Be Positive
Always have the positive mindset, Your boss gave you negative feedback. That evening you go home and tell your partner, “I received a hurtful review today.” Marcus Aurelius said we should drop the emotion and instead say, “I received a review today.” As an investor its critical to make pure judgements, based on data and facts, keeping your mindset free of your opinions, emotions, and ego.
Stick to your Investing Strategy
If you stay steady, you will not only build substantial wealth but will also do better than your peers and better even than most professional money managers.
Epictetus Said: “Once you undertake to do something, stick with it and treat it as something that should be carried through. Don’t pay attention to what people say. It should not influence you in any way.
Ignore the people who say negative.
Compare yourself with people who don’t invest.
Set financial goals that are within your control.
Focus on your own actions. People will brag about how much money they’ve generated with stocks. Ignore the stories, It’s just noise. As a stoic, it’s important to be brutally honest with yourself. The stoics believed in giving every task you do your best. Be serious about making a profit, If you are consistently losing money trading stocks, rethink your strategy or take a break.
Social Media makes us envious of others new cars, houses, exotic vacations, So many of us feel like we’re missing out and that everyone else is living better. These negative emotions are your biggest enemy as you build wealth. If you live by the Stoic path, you will resist your negative emotions and stay consistent. You will do the following:
Invest in yourself: With your knowledge and skills, you will always be able to provide value in the economy. You don’t have to fear being without income for long.
Accept Loss: When you know how to lose and still avoid financial ruin, you will always preserve your wealth. What’s more. dealing with loss is the most important trait of a long-term investor because it keeps you in the game.
Compound your money: Just sit back and let your money do the work. With enough time, your small investments grow into huge sums. Enjoy your life, and always remember that you’re getting richer as long as you keep investing.
The beauty of this path is that it’s available to each and every one of us. Stoicism helps to cultivate strong habits and make make a better person as well as investor.
