Listen to The Bid – BlackRock’s investment podcast

<<THEME MUSIC>>

Oscar: Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.

What are the principles of stoicism and how can they be applied to investing to build long-term wealth? Darius Foroux, author of the newly published book, The Stoic Path to Wealth, brings a fresh perspective on how the time-tested wisdom of stoicism can be applied to achieve financial success in today's volatile markets.

As we dive into the intersection of ancient philosophy and modern wealth management, we'll discover the ways in which stoicism can offer a path to not just wealth. Also, to a more fulfilling and tranquil life.

Darius, thank you so much for joining us on The Bid.

Darius: Thank you for having me.

Oscar: Darius, congratulations on your book, the Stoic Path to Wealth, you talk about common tactics for saving and investing. In it you talk about how your family immigrated to the Netherlands and that had an impact on how you thought about saving and investing. So, tell us about that experience and how that contributed to you wanting to write this book.

Darius: Yeah, so I have a classic immigrant story. My parents came to the Netherlands without money, and they had to build their life from zero. And throughout my childhood, we always lived from paycheck to paycheck the topic of money was always present in our household. That gave me a negative feeling when it came to money because there were always fights about money.

But the thing is that I never lacked anything. At least I didn't feel like I was lacking anything. My parents bought everything with borrowed money, so there was a lot of pressure on them. So, growing up I had the very strong desire to become wealthy, so I didn't have to worry about money anymore.

Oscar: In the book, you introduce us to some prominent stoics. And talk about their philosophies on life and then you go into how that matters for building wealth. So maybe talk a little bit about these individuals and why you think it relates to investing?

Darius: I started investing in stocks in 2007. At the time I was in college, and I also worked at a bank This was before the financial crisis. So, in the Netherlands you could get a four-week training and you would become a mutual fund advisor.

I thought that was a hot shot and I thought I could also invest my own money. And within a year the crash happened and I lost about 60% of the money that I invested and that experience was so painful for me that I stopped investing altogether until 2015, and throughout the time I kept studying, investing, went to grad school, specialized in finance, gained more knowledge, but despite all of that, I still wasn't investing because the pain was still present. So, when I discovered the works of Marcus Aurelius and Epictetus and Seneca and Musonius Rufus, some of the famous stoics, I instantly connected the philosophy to finance because the philosophy is nothing more than a reminder to focus on what you control and ignore what you don't control.

I thought to myself, what is my biggest challenge in life? It's that I am not building wealth at that time. I discovered the philosophy and every time that I was reading the stoics, I always was thinking, how can I use this to become a better investor?

Throughout the years I realized that more knowledge wasn't really the answer. It was better emotional control, and that's what the stoics really helped me with.

Oscar: And it makes a lot of sense. managing your emotions, focusing on what you can control, Stoicism definitely feels like something that if you can adopt it will help you over the long term. But I think it's quite hard maybe just for the average person to all of a sudden, be able to adapt that into their investing style. So, what are some of the practical techniques that you think investors could adopt to start mastering their emotions and learn a bit of what you learned during that time period?

Darius: The most sustainable path that you could follow as a stoic investor, is to start by focusing on what you control, which is your skills. If you want to become a consistent investor, you also want to become a consistent earner.

So, without earning a good living and without income, you always struggle and live paycheck to paycheck. This is what I love about stoicism, it challenges you to become the best version of yourself and to become better at what you do. And when you do that, you generally also get better rewards in your career.

That's how I approached it as well, I start completely focusing on the thing that I controlled the most, which is my effort to become better in my case as a full-time writer and author. As I started doing that, I started to earn more as well. And with my earnings, I started to invest, but in very small sums because the second step in my experience and looking at stoicism is to get comfortable with short-term losses because the biggest mistake that I made in 2007 was that I took all of my savings and I put it in the market, and I started to track it every single day.

I couldn't let it go. when it went down so much, the pain was so big I stopped investing for all these years. So, this time around, or in 2015 when I started on this path, I really made a consistent effort to start investing with small sums so I could just keep tracking it as well, but with more indifference and with more distance to the market. When the market goes up, I should be in balance, and when it goes down, I should also be in balance and not react because I consider myself a long-term investor. I need to pick a strategy and stick to it, no matter what the up and downs are in the market.

That's the second step, when you form the habit of investing and also when you're comfortable with taking losses. As a long-term investor, I think taking losses is just temporary, when you stay the course, you keep investing and over the long term, as the economy keeps growing and markets keep going up, your investments will rebound. And from there you can just let your money compound and do the work on its own.

Oscar: It is interesting you're saying accepting losses is something that you have to be able to do, in order to be successful. Although I think you admit that in 2007 and 2008, it was hard for you to do it first, but perhaps something that you've gotten better at. I think when people hear that I need to accept losses, that sounds like a failing, but you're saying it actually benefits long-term wealth creation. Is that right?

Darius: Yes, a hundred percent because if we fear loss, we can never stick to a strategy. And if we can't stick to a strategy, we can never build long-term wealth. We'll jump from one strategy to the other because we think, oh, maybe I'll find another strategy where I won't lose money. And as we all know, even the S&P500 goes down by double digits and 20, 30% every several years. But when it comes to our emotions, it doesn't feel normal at all, especially if you have a lot of money on the line. You feel like it's the end of the world and you want to sell. It's very difficult to stay the course without training, and I think that's true for all things in life. If you are an athlete and you haven't trained, it's very difficult to perform when you have a game.

In a similar way as an investor, it's very difficult to not sell during recessions or during even pullbacks if you haven't trained yourself. stoicism really helps you to not only get comfortable with losses because you can meditate on it and visualize yourself losing money, but also when it actually happens, especially in the beginning when you start investing with smaller amounts and really focus on building the habit of investing.

And in my experience, I think that's the most important thing. Most investors don't even see themselves as investors. They see themselves as someone who invests. But if you invest regularly, you should look at yourself as an investor. And what does an investor do? They just invest and they just stay the course.

Oscar: And you mentioned also indifference and distance from the market, which is what a stoic would practice. But it's interesting because we live in an era where information is around us all the time. So, it would seem hard to do that, but it. Sounds like if you can master that, you're going to have more of a focus on the long term.

Darius, you mentioned a few prominent stoics earlier, Marcus Aurelius, Seneca, a few others. You also talk about in the book this concept of a stoic edge. So, tell us a little bit more about this concept and how you think that edge can serve to protect a person's time and mental wellbeing.

Darius: So, one of the concepts that successful investors often talk about is having an edge when it comes to beating the market. Now, I think as an individual investor, the goal should not be to beat the market. I feel like it's great if you can do that, but the goal is to build wealth. And to profit from the wealth that's been created in the stock market.

If you look at the different types of edges that professional investors may have, whether it's a size edge, or if it's a quant edge, those types of edges are not attainable for the individual investor. And in fact, I think most people don't even care about having an edge. They just want to build wealth in a similar way that I wanted to build wealth.

The stoic edge is something that everyone can acquire by simply working on managing their emotions and following the stoic path of wealth of earning money, forming the habit, getting comfortable with losses, and letting your money compound.

Once you're able to do that successfully, I feel you've acquired a stoic edge because when other investors are looking at hedging their portfolios or looking at other asset classes or trying to sell or trying to time the market. As a stoic investor, you can just stay the course, sit tight and just keep buying no matter what happens.

Oscar: Right, and that's an edge that you think a lot of people can acquire. it may not be easy, but it is somewhere where they can acquire an edge to, as you say, not really focus on beating the market, but on building long-term wealth. Darius in the book you talk about a couple of principles, and you've touched on a few of these, but I'm thinking about, invest in yourself, accepting losses, also compounding your money. Maybe elaborate a little bit more on those principles and why you think they're important.

Darius: I think compounding your money always sounds great on paper. And when we start making the mental calculations, we can think of how much money we could earn in the future. But it only works if you really say goodbye to the money that you invest today.

So, one of the mistakes that I made early on also as an investor, even when I started on this path, was to invest my money and later on would think to myself, oh, maybe I could use this for down payment on my house in a few years.

As a long-term investor, I don't think that's the right move, because if you want to invest in the stock market, I feel like the best thing you can do for yourself is just to say goodbye to that money and that forces you to invest with money that you won't miss, that you won't need in the next one, two or three years. And that is really a mindset because when you really look at it that way, you don't even think about touching it anymore.

And then another technique that I've learned from stoicism, but also from famous investors is to trust your judgment more.

And one of the things that I learned, particularly from studying Stanley Druckenmiller during the .com boom, he stayed away most of the time, and then towards the end he hired someone and basically let the other person influence his judgment. Druckenmiller later on admitted that he didn't trust his judgment enough during that time, and they lost a lot of money during the crash of 2000, 2001. So that's something that even the most famous investors, sometimes have difficulty with.

So, if you just learn the basics of investing and pick a strategy that you really understand and that you really feel like you know what is going on under the hood, then you should feel confident enough to trust your own dec decisions and your own judgment. During those moments, you are really your best friend.

Oscar: I'm thinking towards the end of the book. You talk about, be like granite as you think about these principles, in your life and as they apply to investing, investors have to be very self-aware, they have to resist the pendulum swinging between fear and greed. But when you say be like, granite, what did you mean by that?

Darius: I feel like that's the ultimate goal as a stoic investor when you are so consistent. And like a rock that the waves keep hitting on and you just stay put and you've picked an investing strategy, and you just keep on investing and investing. And the way that I came up with that phrase was, I remember after the crash of oh eight, I was reading a column on online and.

The person was arguing that if you have the guts to invest in the stock market now you must be made of granite. And that always stuck with me. I always thought, what does this person really mean is there's so much uncertainty. Okay, I get it. But you could always argue that there's always something going on in the world, whether it's a war or an election, political unrest, a looming recession, interest rates going up or down. So, I think it would be an illusion to wait for the perfect moment to invest. The perfect moment to invest is always now or whenever you can. Whenever you have the money, thing you can do is to be like granite and just stay the course no matter what happens.

Oscar: They always talk about the stock market climbing the wall of worry. it seems to always exist. So being like granite will allow you to. Perhaps see over that wall and what comes next. Darius, if, someone wants to take what you're saying and apply more stoic approaches to their investing day to day, what are just some practical things that, that they could start doing now?

Darius: One of the most important ideas from stoicism is to live according to the golden mean or the middle way, and it's really a lifestyle which avoids excess. That's also a difficult thing to apply in life, especially if you're used to spending most of your income or always having the desire to upgrade your lifestyle, for example.

And the stoics really reminded us that it's okay to have the desire to improve your life, even to earn more, Money ultimately also buys freedom. So, this is why so many of us invest not just to acquire more money. So, I think it's possible to live like a stoic by adopting the golden mean, plus at the same time having the desire to become wealthier. And if you look at a day to, on a day-to-day basis, how we can apply that is to just find more balance in life.

A funny way to practice that is with your diet. Mosonius Rufus said that the best way to practice self-control and moderation and living in the middle is by eating in moderation as well. A lot of folks don't connect their diets with their finances, but I really think those two things are correlated because if you are better at managing your appetite, or not managing your appetite, but just making sure that you, are not over satiated and that you just, make sure that you have a moderate diet. Then I feel like that will translate to your finances as well.

We want to earn, but we also want to go on vacations and have some rest. So, living in the middle, I feel is one of the best things you can do, just not only for your mind, but also for your finances.

Oscar: Well, Darius, congrats again on the book. I think everything in moderation has typically been a piece of advice that, that I've also heard, across my life. And I didn't know 2007, 2008 Darius, but the Darius that I'm talking to today seems very much in balance and very much in control of his emotions. So, thank you for joining us on The Bid.

Darius: Thank you. Appreciate it.

Oscar: If you've enjoyed this conversation, check out our episode entitled Do You Foster a Culture of Growth featuring Dr. Mary Murphy, where we discuss how leaders and investors can cultivate a growth-oriented culture to drive innovation, resilience, and adaptability.

Disclosure

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities, funds or strategies to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The opinions expressed are as of the date of publication and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. BlackRock does and may seek to do business with companies covered in this podcast. As a result, readers should be aware that the firm may have a conflict of interest that could affect the objectivity of this podcast.​

For more information go https://www.blackrock.com/corporate/compliance/bid-disclosures

For investors in Israel: BlackRock Investment Management (UK) Limited is not licensed under Israel’s Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 5755-1995 (the 'Advice Law'), nor does it carry insurance thereunder.

In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel:+ 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.​

In the European Economic Area (EEA): this is Issued by BlackRock (Netherlands) B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets. Registered office Amstelplein 1, 1096 HA, Amsterdam, Tel: 020 – 549 5200, Tel: 31-20- 549-5200. Trade Register No. 17068311 For your protection telephone calls are usually recorded.

©2024 BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. All other trademarks are those of their respective owners.​

MKTGSH0624U/M-3638530