The Stoic Path to Wealth summary

What’s the surest way to become wealthy? Here’s a hint: it isn’t asking for a raise. In fact, for the top 1 percent – the millionaires and above – salaries account for as little as 15 percent of their income. While a higher salary certainly helps in the short term, to really build wealth, you need to invest.

Consider inflation. Over the past four decades, inflation has eroded the value of money at around 3 percent annually in the United States. Meanwhile, the S&P 500 index, which represents the 500 largest publicly traded US companies, has yielded an average annual positive return of more than 11 percent. This means if you stuck $1,000 under the proverbial mattress in 1980, by 2022 it would have dwindled to a mere $240 in value. On the other hand, if you’d invested it in the S&P 500, that same cool grand would have grown to nearly $30,000 in value.

Author Darius Foroux argues that the formula for growing your wealth is simple: invest it in reliable assets and keep it there. But simple doesn’t mean easy; pulling this off can be more challenging than it sounds. 

Why? There are three reasons.

The first is volatility. In the decades since 1980, we’ve seen wars, earthquakes, recessions, booms, crashes, and even pandemics. Regardless of the market’s gradual upward trend, this volatility triggers two powerful emotional responses: fear and greed. When prices plummet, fear drives people to sell at a loss. And when the market shoots up, greed tempts them to pour all their savings into the market at once. 

The second challenge is consistency. Today’s vast array of investment options can be overwhelming, leading many investors to frequently switch up strategies and chase the latest trends. But successful investing often boils down to filtering out the noise and adhering to a proven investment strategy year after year.

What if you don’t have an investment strategy? What Foroux recommends to his own friends and family is an exchange-traded fund (ETF) that tracks – once again – the S&P 500. It takes minimal time and effort to execute, and it performs well. At an 11 percent interest rate, for instance, your investment will double roughly every seven years thanks to compounding.

But to succeed in this or any strategy, you’ve got to keep your cool on the market rollercoaster year after year. You have to stay strong and resist the burning temptation to abandon ship when faced with glittering opportunities, looming threats, or great loss – as we’ll see in the next section.