Investment Wisdom From the Ancient Stoics

Original post

I was driving on the freeway last week, and a guy on a motorcycle went flying by, maybe 15 miles per hour over the speed limit.

In my head, I heard the voice of an ornery grandfather criticizing this fool for driving so dangerously, being so reckless, having such poor manners… Then I caught myself.

A thought dawned on me: “I’ll bet he’s having a lot of fun.”

Immediately my feelings changed. I went from feeling grumpy and annoyed to open and lighthearted.

Suddenly I could appreciate the freedom this fellow was expressing, even though it wasn’t how I would do it.

In short, I was empathizing with the best in him. And it felt wonderful.

The ornery grandfather I heard was me wanting to control other people, this guy in particular, so that things would go the way I thought they should.

But the truth is, I have absolutely no control over anything that man does. In that moment, I had a choice about what I would focus on and how I was going to feel about it. That was the extent of my control.

By accepting that I don’t have godlike powers to make other people behave the way I want them to, I’m embracing what’s true. And there’s something liberating about that.

Applying Ancient Wisdom

There’s a valuable principle from the ancient Stoics that you can use to make your life – and your investment portfolio – more productive and less stressful.

The great Stoic philosopher Epictetus said, “Happiness and freedom begin with a clear understanding of one principle: Some things are within our control, and some things are not. It is only after you have faced up to this fundamental rule and learned to distinguish between what you can and can’t control that inner tranquility and outer effectiveness become possible.”

This has huge implications for your investment portfolio as well…

Take a moment to consider all the factors you cannot control: the economy, inflation, interest rates, currency values, commodity prices, technological innovation, Fed policy, new legislation… not to mention the short-term direction of the markets themselves.

That’s why Alexander Green recommends that you direct your attention to the things you can control: your asset allocation, your security selection, your sell strategy (generally trailing stops), your investment costs and your tax management strategies.

He rightly suggests that you focus on what you can control, take appropriate action and then own that.

The effect is significant, and it really stems from ancient Stoic principles.

Theologian Reinhold Niebuhr’s Serenity Prayer puts it this way: “God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”

The bottom line: Focus on what you can control and accept what you can’t because, by definition, you can’t control it.

When we spend time dwelling on, ruminating on or fuming about things over which we have no control, we only make ourselves feel helpless and miserable.

Moving Beyond Worry to Action

One sure sign that we’re focusing on what we can’t control is worry. This is particularly true of investors.

Worrying puts us in a passive, helpless stance in relation to events that are unfolding. It drains us of the energy and spirit to act effectively where we can genuinely make an impact.

UCLA’s legendary basketball coach John Wooden once said, “Do not let what you cannot do interfere with what you can do.”

As a therapist and life coach, I’ve worked with clients who struggle financially. Overwhelmed with worry, they often say something like “Given the house that I live in and the lifestyle that I have, how can I solve my financial problems?”

These clients spend a lot of time and energy worrying about their plight without seeing any possible action. But they will not consider possible solutions, such as moving to a more affordable home or otherwise changing their too-expensive lifestyle.

If you find yourself worrying – about your investment portfolio or any other aspect of your life – ask yourself this question: “What action could I take that would make things better if I let go of my preconceived vision of how everything has to be?”

Thinking Positive

When we spend our time pondering how we wish the markets – or other people – would behave, we’re putting ourselves in a defensive, vigilant posture of protection. By focusing on our wishes, we’re missing what is actually happening right in front of us…

And what we can control.

However, positive emotions boost our immune systems, improve our heart health and energize us emotionally. They bring us into higher brain function and the part of our nervous system that allows us to feel safety and trust. And that attunes us to understanding others.

Try something this week (I’ll join you). See how often you can catch yourself worrying or getting irritable or angry about things you cannot control. When you do, try to quickly redirect your thinking toward either a positive quality you might’ve overlooked or something you can actually do to be more effective.

It’s bound to make you a better investor and a happier individual.

Good investing,

Joel