Invest Like a Stoic

Bill Parrott |

Stoics would have made great investors because they focused on issues they could control. Marcus Aurelius, Epictetus, and Seneca would probably have much to say about today's markets or, more importantly, investors' reactions to the performance of stocks and bonds.

Stocks and bonds face strong headwinds from inflation, rising interest rates, COVID, the supply chain, and the war in Ukraine. These areas are causing heartache among investors as global markets crumble. Yet, we can't control the outcome of these worldly events.

What can you control? As an investor, you can control your spending and savings; that's about it. If you reduce your spending, you can increase your savings, and the more you save, the better. Of course, if your spending rises, you may have to reduce your savings.

Here are a few tips to help you manage your assets and emotions.

  1. Automate your expenses by depositing your paycheck and paying your bills. Automation simplifies your life and helps you avoid late fees and penalties.
  2. Automate your savings. Automate your investment accounts after setting up your 401(k) plan. Link your checking and savings account to build up your emergency fund. Transferring dollars monthly from checking to savings gives you access to the funds while increasing your emergency reserves.
  3. Buy the dip. If you automate your savings, you can buy the dip without emotion. It's hard to buy stocks when they fall, but you can eliminate this fear through automation.
  4. Do not check your accounts. If you review your accounts daily, try doing it weekly. If you review them weekly, try doing it monthly. If you review them monthly, try doing it annually. The less you look at your investments, the better, especially if you own a diversified portfolio of low-cost funds.
  5. Manage your time horizon. If you need access to your funds in one year or less, deposit your money in money market funds, CDs, or T-Bills! If your horizon is three to five years or more, buy stocks.
  6. Build a financial plan. A financial plan guides your financial future and quantifies your hopes, dreams, and fears.

You can control your savings, spending, and outlook, but you can't control inflation, interest rates, or world war. Despite these recurring issues, stocks rise more than they fall.

From 1926 to 2021, the stock market has risen 75% of the time.[1]

Best five years:

  • 1933 = up 56.7%
  • 1954 = up 50%
  • 1958 = up 45%
  • 1935 = up 44.4%
  • 1975 = up 38.8%

Worst five years:

  • 1931 = down 43.5%
  • 2008 = down 36.7%
  • 1937 = down 34.7%
  • 1930 = down 28.8%
  • 1974 = down 27%

A key takeaway is that the best years follow the worst years; sharp down days precede strong up days, and risk and return are linked.

I don't know when stocks will recover, so follow your plan and focus on what you can control.

We control our reasoned choice and all acts that depend on that moral will. ~ Epictetus

April 26, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your                                     





[1] The Rewarding Distribution of US Stock Market Returns – Dimensional, 1926 to 2021