Indian Samkhya Philosophy in Investment & Wealth Management – Part 1: Financial Freedom & The Three Gunas

Financial freedom is one of the most important goals for any human being. The pursuit of wealth is a core activity for all, and one must invest in good stocks and bonds to get there as early as possible. However, it is also important to remember that this is in the context of a larger purpose for life. As SEBI-registered investment managers, we are often tasked with growing wealth for our clients, but we also consider it our duty to place this in the larger context called “life.”

Freedom and Happiness – The Story of a Leopard and a Dog

At a preliminary level, physical freedom (i.e., no slavery, bondage, or captivity) and freedom from disease (i.e., having good health) are basic. This is true for animals too. This story is about a real incident that occurred in the Kombaru sanctuary in Karnataka. A leopard was chasing the dog. The dog entered a toilet through a window. The leopard entered behind the dog, and both got stuck in the toilet as someone closed it. When the dog saw the leopard, he panicked and quietly sat in one corner – he had nowhere to go and didn’t even dare to bark.

Here’s the strange thing – even though the leopard was hungry and was chasing the dog, he did not eat the dog. He could have had dinner by tearing down the dog in one leap. But the two animals sat quietly in different corners of that small room for almost twelve hours. Eventually, the forest department arrived and captured the leopard using a tranquillizer dart.

Why didn’t the hungry leopard pounce on the dog, when it was so easy? According to wildlife researchers, wild animals are very sensitive to their freedom. As soon as they realize their liberty has been taken away, they can feel deep sorrow, so much so that they can forget their hunger. Their natural motivation to feed the stomach fades away. This shows that freedom and happiness are connected not only to humans but also to animals.?

Financial Freedom Can Enable Spiritual Freedom

The same goes for health and finances, i.e., freedom from disease and financial freedom. These two freedoms allow one to perform to one’s full potential. Once financial freedom is attained, one can then aspire to spiritual freedom. Why is this called freedom? Because it allows one to escape the ‘twin impostors’ of success and failure, pleasure and sorrow. This is the ultimate goal and results in lasting happiness (or sat-chit-ananda), as our scriptures say.

A person keen on “Moksha” (the classic Sanskrit word for spiritual freedom) can eagerly pursue the techniques offered by the philosophy of their choice, such as Samkhya, Yoga, or Vedanta. This is similar to someone keen on “financial freedom/well-being” adopting various investment approaches to realize their goals. The Samkhya Philosophy correlates very well with such approaches in the area of investments and wealth management. We will draw upon some of the salient aspects of Samkhya and compare these approaches focusing on the Three Gunas. In another post, we will explore the Prakruthi – Purusha system of Samkhya in more detail.

Understanding The Profile: Three Gunas, and Risk Profile

The first principle of any investment is to understand the risk appetite (i.e., know about one’s own nature and personal situation) before embarking on any investment. For instance, a retired person may not want to put all her savings into high-risk assets like small caps or cryptocurrencies.?

The second principle is to understand what the requirements are: liquidity for regular expenses for a few years; money for near-term goals, which is safety; and finally, future goals such as retirement, which would need growth. These three can be called LSG Needs. Though these 3 do not directly correspond one-on-one, it brings us to the three Gunas first enunciated by the Samkhya philosophers, which are Sattva, Rajas and Tamas. These qualities are present in each of us but to differing degrees.?

Tamas – Risk of being too Risk Averse

This is an inactive, or inertial, condition. A vast majority of people invest their hard-earned cash in different fixed-income products. These are “savings” and not “investments,” since savings are done with the goal of protecting capital, whereas investments are done with the goal of growing capital. If you account for inflation and taxes, savings in fixed-income products don’t produce a significant real rate of return; as a result, one’s assets are in a default state. This does not mean that one should avoid ‘safe’ assets completely; we just need to moderate their allocation and ensure enough is set aside for their liquidity needs and Safety needs.?

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