Infectious Disease

Classes from asset administration from a 2000 yr previous philosophy

December 10, 2020

5 min read

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Bhatia and Mandell do not report any relevant financial information.

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Stoicism has seen a significant revival in popularity over the past decade. It is a school of Hellenistic philosophy founded by the thinker Zeno in Athens in the early third century BC.

Stoicism is probably best known for its most famous follower, the Roman Emperor Marcus Aurelius.

Although many of our country’s historical figures, such as George Washington, Thomas Jefferson, and Ralph Waldo Emerson, studied stoicism, this philosophy has become popular today and is welcomed by business leaders and public figures. This increased interest has resulted in a number of bestsellers on the subject, including The Obstacle Is the Way and The Daily Stoic. With its increasing popularity, many doctors are also exposed to this philosophy.

In this article, we apply five stoic practices, or maxims, to the wealth management challenge, with the aim of making a philosophy over 2,000 years old relevant for physicians as they grapple with financial problems.

The practice of bad intentions

Sanjeev Bhatia

David B. Mandell, JD, MBA

David B. Mandell

Literally, “willful evil” means the practice of thinking about what can go wrong in the future. The concept is not to deal with negative scenarios, but to focus enough on them to really realize that they can occur, visualize how to deal with them in the short term, and then ideally thrive in the future . In this way, the fears and anxieties associated with possible catastrophic events are dispelled, and one feels more solid in the present knowing that no matter what life throws at one, one is prepared.

Premeditatio Malorum’s valuable practice has a number of uses for asset management:

Really consider the “risk” part of the risk-return calculation when investing. It’s easy to nod your head when discussing the risks of certain investments and then overreact when they lose value. Frank anticipation of risk, including an idea of ​​how someone will react if assets depreciate, can prevent future panic reactions and prove invaluable during the market downturn.

Realize the importance of diversification. A likely side effect of looking at risk beforehand is understanding the value of diversification. Those who ignore market downturns or “black swan” events are often too focused on risk, high-return asset classes. Conversely, those who practice Premeditatio Malorum will typically advocate diversifying asset classes.

Inclusion of asset protection planning through insurance and legal instruments. The consideration of what can go wrong should extend beyond investing to other areas of risk in wealth planning, from the physical destruction of property to lawsuit, disability or death. The key to this exercise is not dealing with these risks in an unhealthy way, but rather recognizing them, thinking about their likelihood, and taking reasonable steps to mitigate their harm. This can be effectively achieved through insurance, asset protection, and estate planning.

Luck: preparation meets opportunity

“Happiness is what happens when preparation meets opportunity,” wrote Seneca, a leading Roman Stoic philosopher who died in AD 65.

Happiness is certainly an important element of any effort. In a sense, we are happy to have been born at this time and place in history. Within asset management, you can be lucky with certain investments that produce excellent returns. However, this “luck” is often preceded by a capital strategy, asset allocation model, and even due diligence for a particular investment. While these processes certainly do not guarantee excessive returns, investments that perform well rarely come “out of the blue” or out of sheer luck.

Take into account any open decisions you have made in your own wealth planning. While luck was likely a factor (is anything ever a “sure thing”?), It was likely careful preparation.

More conceited than real suffering

“We suffer more in the imagination than in reality.” – Seneca

The wisdom in another timeless quote from Seneca can be applied to almost any area of ​​life. As humans, our mental abilities can be problematic and lead us down a path of negative thoughts and emotions that may not be related to reality. Think about the number of times you have quarreled with someone on your mind when in fact that argument never happened.

Applying this wisdom to wealth management is important as investors are often caught up in cycles of greed or fear, resulting in buying and selling that may not be tied to the reality of the markets. Indeed, investing with emotions can be detrimental. Numerous studies, many of which are described in Mandell’s book Wealth Management Made Simple, show how many private investors are burned by such considerations and their attempts to time the market.

If investors can remove their inner dialogue from the investment process or work with a dispassionate advisor to counter such thoughts, they will usually get better results.

Everything changes over time

“No man ever steps into the same river twice because it is not the same river and he is not the same man.” – Heraclitus, pre-stoic philosopher and great influence on the Stoics; 535 BC Until 475 BC

Heraclitus quotes that everything changes over time and nothing is permanent. This insight is crucial for long-term financial planning, also known as age modeling.

A financial plan should no longer be a static written document containing a model calculated on a particular day, as this type of plan can quickly become out of date. Instead, dynamic planning should include a software-generated financial model that can be continuously reviewed, optimized and updated. In essence, financial planning should reflect changes and be iterative so that it is adjusted with each review and update.

Charitable planning

“The only wealth that you will keep forever is the wealth that you gave away.” – Marcus Aurelius.

Many doctors make charitable planning an important part of their wealth planning, especially as they near retirement and beyond. For many, the psychological benefit of donating to charity is much greater than if they were to spend the money on themselves – an effect that has been confirmed in many studies. While Marcus Aurelius may have been referring to a belief in the afterlife that prevailed in ancient Rome, it can precisely be interpreted as having benefits during our lives on earth. In a broader sense, Aurelius apparently recognized the importance of giving away wealth and probably encouraged his wealthy Roman colleagues to do so. In this sense, his advice is just as relevant today as it was 2000 years ago.

Stoic philosophy has endured since ancient times due to its insightful wisdom. Many of its lessons can be applied to wealth management, some of which we’ve explored in this article. If these insights sparked interest, we encourage you to learn more about the fascinating stoics and ways stoicism can guide your wealth planning decisions and remain focused on long-term financial goals.

References:

Wealth Planning for the Modern Doctor and Wealth Management Made Easy are available free of charge in print or e-book formats by sending HEALIO to 47177 or at www.ojmbookstore.com. Enter the code HEALIO at checkout.

www.health.harvard.edu/newsletter_article/In_Brief_Money_can_buy_happiness__if_you_give_it_away

For more informations:

Sanjeev Bhatia, MD, is an orthopedic sports physician with Northwestern Medicine in Warrenville, Illinois. He can be reached at sanjeevbhatia1@gmail.com.

David B. Mandell, JD, MBA, is a lawyer and founder of the asset management company OJM Group, www.ojmgroup.com. You should seek professional tax and legal advice before implementing any of the strategies described here. He can be reached at mandell@ojmgroup.com or (877) 656-4362.

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