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Stoicism has seen rather a lot of interest in the last few years — maybe it’s the fallout of a period of financial and social uncertainty, but I think the rise of events like “Stoic Week” tell us something about our desire to find meaning. At the same time, most people aren’t really sure what Stoicism is all about. The popular understanding of Stoicism tends to focus on refusing to display emotions in a very British “stiff upper lip” sort of sense, or trying to deny the influence of emotions in the way Spock did on Star Trek. These may not be particularly good understandings of Stoicism, but at least they give us a starting place.

This isn’t the time or place for a discourse on the fundamentals of a modern Stoicism, though; Lawrence Becker has done a good, if philosophically technical, job of that in his book A New Stoicism. Nor is it the time or place for a discussion of the implications of Stoic philosophy for a “philosophy of life”, similar in some ways to a Zen Buddhist practice; William Irvine has done an excellent and non-technical job of that in his book, A Guide to the Good Life.

But I do think that we can give a taste of Stoicism that reaches our financial concerns. It’s pretty clear to me that the ancient Stoics have several interesting things to say that apply to our modern understanding of wealth planning and investment advice.

Epictetus is one of the three key Stoic philosophers of the Roman era. He was born a slave, and thus it’s not surprising that much of his philosophical insight revolves around the Stoic understanding of the moral and psychological features of freedom. One of his key ideas, particularly relevant to us, is that while we can’t control the way the world works, we most certainly can control the way we react to the world:

We are disturbed not by things, but by the views which we take of things. Thus even death is nothing terrible, else it would have appeared so to Socrates. But the terror consists in our notion of death, that it is to be feared. (Enchiridion, 5)

In the investment world, we must constantly be aware that none of us individually control the markets — stocks are up today, and down tomorrow, regardless of our personal wishes. If we get excited when some particular part of the market jumps upward quickly, we may be tempted to put more of our money into that market sector; if the market jumps down quickly, we may panic and sell everything. Both of these reactions are likely to be mistakes. If we can control our emotional responses to the way the markets move, a Stoic like Epictetus might advise, we’ll be more likely to be able to make rational decisions about what to do and when.

Another of the most important Roman Stoics was Seneca. A Senator, and an advisor to emperors, Seneca was no stranger to wealth, power, and control. And he recognized that a vital part of the proper use of these things is a prudent plan. Following Epictetus’ encouragement to begin every undertaking with a serious plan (Enchiridion, 29), Seneca asks us to consider that those who act without a plan are destined to wander:

Some people follow no plan consistently, but are pushed into one scheme after another by a fickleness that’s rambling, unstable, and never satisfied. Others have no goals at all but are just overtaken by fate as they stand and stare. (Shortness of Life, 48)

At the same time, Seneca assures us, we do need to have the wisdom to understand when our plans have been overtaken by events, and need to be altered. “There is nothing wrong in changing a plan when the situation is changed.” (Moral Essays III, 283)

One way to help control our emotional reactions in the face of market instability is to have a firm plan. Annual studies by DALBAR show pretty convincingly that most investors, without the benefit of an advisor or a firm plan, end up buying and selling at the worst possible moments. This has resulted in the “average” stock fund investor earning an average of 3.7% annually for the last 20 years — while the S&P 500 index has earned an average of 10.4% during the same period (1996-2015). In order to avoid the temptations of our “fickle” negative emotions, we put an Investment Policy Statement in place for each of our clients as part of our set-up process, based on their long-term financial needs and ability to tolerate risk.

Important as having a plan is, though, it’s not quite enough by itself. A third Stoic sage with something important to say about investment management is Marcus Aurelius, Emperor of Rome from 161 to 180 AD. The best plans, Marcus says, will be directed toward the best goals:

First, do nothing aimlessly nor without relation to an end. Secondly, relate your action to no other end except the good of human fellowship. (Meditations XII.20)

In other passages, Marcus urges us also “to meditate on Universal Nature, and the work of her hands” (Meditations VIII.26). In other words, Marcus thinks that we should direct our plans toward the twin goals of environmental care and social justice — two of the key features of the modern “Sustainable, Responsible, Impact” (SRI) investment industry.

I suppose it’s not particularly surprising that the Stoic philosophers, as concerned as they are with right action in all parts of life, would recommend that we make a point of making sure that all of our plans are consistent with our highest moral obligations. We’re finding that interest in investments that serve social and environmental ends as well as traditional financial goals is increasing, even among giant institutional investors. And there’s accumulating evidence that SRI portfolios can not only keep up with the performance of their non-SRI benchmarks, but do so with somewhat lower volatility, providing more stable long-term performance.

We think it’s worth studying the Roman Stoic philosophers carefully. Their eminently practical “philosophy of life” is rigorous and well-grounded in logic and psychology. And its emphasis on avoiding panic by means of careful planning aimed at the highest ethical ends makes Stoicism a powerful tool for investors and investment advisors.



— Past performance is no guarantee of future results. Investors cannot invest directly in indexes, but may purchase other investment products designed to track the performance of various indexes. Diversification cannot guarantee protection against losses, but is a vital component of prudent portfolio construction.