The Zurich Axioms

The Zurich Axioms: The rules of risk and reward used by generations of Swiss bankers 

by Max Gunther

Max Gunther writes about the 12 major and 16 minor axioms handed down to him by his father, a swiss banker/speculator.

my Take

Though this book has less number of pages, it is packed with gems. Must read for anybody serious about investments or trading

Takeaways from the book

ON RISK 

1.Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.

Minor Axiom I : Always play for meaningful stakes.

Minor Axiom II : Resist the allure of diversification.

ON GREED

2 . Always take your profit too soon.

Minor Axiom III : Decide in advance what gain you want from a venture, and when you get it, get out.

ON HOPE

3. When the ship starts to sink, don't pray. Jump.

Minor Axiom IV : Accept small losses cheerfully as a fact of life. Expect to experience several while  awaiting a large gain.

ON FORECAST

4. Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly.

ON PATTERNS

5. Chaos is not dangerous until it begins to look orderly.

Minor Axiom V : Beware the Historian's Trap.

Minor Axiom VI : Beware the Chartist's Illusion.

Minor Axiom VII : Beware the Correlation and Causality Delusions.

Minor Axiom VIII : Beware the Gambler's Fallacy.

ON MOBILITY

6. Avoid putting down roots. They impede motion.

Minor Axiom IX : Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia.

Minor Axiom X : Never hesitate to abandon a venture if something more attractive comes into view.

ON INTUITION

7. A hunch can be trusted if it can be explained.

Minor Axiom XI : Never confuse a hunch with a hope.

ON RELIGION AND THE OCCULT

8. It is unlikely that God's plan for the universe includes making you rich.

Minor Axiom XII : If astrology worked, all astrologers would be rich.

Minor Axiom XIII : A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.

ON OPTIMISM AND PESSIMISM

9. Optimism means expecting the best, but confidence means knowing how to handle the worst. Never make a move if you are merely optimistic.

ON CONSENSUS

10. Disregard the majority opinion as it is probably wrong.

Minor Axiom XIV : Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.

ON STUBBORNNESS

11. If it doesn't pay off the first time, forget it.

Minor Axiom XV : Never try to save a bad investment by "averaging down."

ON PLANNING

12. Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own or other people's long-range plans seriously.

Minor Axiom XVI : Shun long-term investments.