In this post I will explore if the ancient Chinese wisdom of Wu Wei can help me make better investment decisions.
As you already know, I love to read. It opens new worlds, gives me new knowledge and new insights. Besides reading investment and dividend books, I also read biographies and management books.
Lately I have been reading some articles about investing and the impact of human emotions on it. And this reminded me about a book I read more than 20 years ago. It was the classic book of Dr. Alexander Elder – Trading for a living – psychology, trading tactics, money management. In this book Dr. Elder explains that psychology is the key to successful investing and understanding the market. It was one of the first books I read on this subject. It is a subject that makes you think and look at things from another/different angle. And that is why I love reading about this subject.
In one of the articles I read last week it stated:
A little bit of (ancient) Chinese wisdom makes you more receptive for surprises and helps you to evaluate your decisions.
Well that got my attention. So I kept on reading, because I always try to improve my investment decisions. I always reflect on my investment actions and let you readers in on it, through my blog posts.
But can ancient Chinese wisdom help me with my investments? Let’s take a closer look.
We all know that there are a lot of ancient Chinese philosophers. Just think for a moment and you probably can come up with a name or two*). They all have their own ideas. But if you look closely, you can see that they have, among other things, one ground principle in common. This is Wu Wei.
Wu Wei comes from Taoism. It is the concept of knowing when to act and when not to act. If you translate Wu Wei in its literal meaning, it reads: “do not act against the nature of things”. This can be translated to investing. And maybe this is where Warren Buffett got his quote:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
Well he is called the Oracle of Omaha for a reason 😉
But lets go back to Wu Wei.
Core Principles of Wu Wei
What can we learn from Wu Wei? There is a lot written about Wu Wei on the Internet. But let me try to summarize what I think are the core principles of Wu Wei. And also try to translate these principles to investing.
- Always keep learning – Keep sharpening your mind. As I write here, I consider this as a gift to myself.
- Be honest – Honesty last the longest and always be true to your self.
- Keep some space in your diary – Always have some cash available to make a purchase if opportunity comes along.
- Thrust your feeling – Do your research on a stock, but also listen to your heart and gut feeling. This is why I don’t invest in Tabaco and the Weapon industry.
- Accept small setbacks – sometimes you just have to let go. Accept a lost, sell the stock and look forward!
- Do the opposite – be fearful when others are greedy and greedy when others are fearful.
- Commit to rituals – If you automate your financials it goes much easier. Always pay your self first.
- It is not about the destination but about the journey – Embrace your mistakes and learn from them. I try this by reviewing my goals every quarter. This is my latest letter to my readers.
After reading about Wu Wei, I can safely say that the core principles of Wu Wei can be well applied to investing. And if I look at the core principles of Wu Wei, I can say I’m using Wu Wei in my investing.
Thanks for reading.
*) And did you come up with some philosophers? Just to name a few (and that you don’t have to Goolge for it: Confucius, Laozi, Mencius and Mozi).