thin book, but jam-packed with value and wisdom!, October 15, 2006
By Jaronimo (NJ, the garden state) - See all my reviews
This review is from: The Zurich Axioms (Paperback)
I love books on risk management, especially when they differ from mainstream opinion of what is correct. And they are even better when they make total sense like this book does.
Max Gunther writes about the 12 major and 16 minor axioms handed down to him by his father, a swiss banker/speculator. I believe if you follow these axioms you can be very successful, or at least not lose everything you have worked hard to gain.
The first axiom is on risk. Max tells some good stories about people that risked, alongside those that played it safe. You can probably guess who did well in the long run. The minor axioms for risk talk about always play for meaningful stakes and resisting the allure of diversification. Meaningful stakes is a problem for many traders/investors. They take trades that are low risk and low reward, when there are plenty of slightly higher risk and much higher reward trades available on a daily basis. And lets not even get into the subject of diversification, that kills many accounts. Most truly successful people take the opposite aproach to diversification, they put all their eggs in one basket, and then keep a very close eye on that basket.
The second axiom is greed, one of my personal favorites. Max talks about always taking your profit too early! I really like his take on profits. I have had way too many times where I was making great money on trades and then sat on my hands waiting for it to go higher. Thats usually when the bottom falls out and you end up with less than half the profit you would have had if you got out "too soon". The minor axiom for greed is to know what your target profit level is in advance, then to get out once that number is hit. Great advice.
The other axioms are on;
-Hope - When the ship starts to sink, don't pray, jump.
-Forecasts - Human behavior cannot be predicted, distrust anyone who claims to know the future.
-Patterns - Chaos is not dangerous until it begins to look orderly.
-Mobility - Avoid putting down roots, they impede motion.
-Intuition - A hunch can be trusted if it can be explained.
-Religon and the occult - It is unlikely that Gods plan for the universe includes making you rich. (plus God must really love poor people, afterall he made so many of them)
-Optimism and pessimism - Optimism means expecting the best, but confidence means knowing how to handle the worst.
-Consensus - Disregard the majority opinion, it is probably wrong.
-Stubbornness - If it doesn't pay off the first time, forget about it.
-Planning - Long-range plans engender the dangerous belief that the future is under control. It is important never to take your long-range plans, or others plans seriously.
This book is packed with value. It will not lead you to investments or speculations, but it does lay down some of the all-important groundwork so you can go into money making opportunities with the correct mental outlook. This book has earned a place on my very short list of important books.