the zurick axioms .... for investing

Max Heinrich studied the principles of the Swiss Bankers for making money. He then published a great little book called "The Zurick Axioms".

In summary form, the axioms are:


On Risk

* Worry is not a sickness but a sign of health - if you are not worried, you are not risking enough.

* Always play for meaningful stakes - if an amount is so small that its loss won't make any significant difference, then it isn't likely to bring any significant gains either.

* Resist the allure of diversification.


On Greed

* Always take your profit too soon.

* Decide in advance what gain you want from a venture, and when you get it, get out.


On Hope

* When the ship starts sinking, don't pray. Jump.

* Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.


On Forecasts

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


On Patterns

* Chaos is not dangerous until it starts to look orderly.

* Beware the historian's trap - it is based on the age-old but entirely unwarranted belief that the orderly repetition of history allows for accurate forecasting in certain situations.

* Beware the chartist's illusion - it is characteristic of human minds to perceive links of cause and effect where none exist.

* Beware the gambler's fallacy - there's no such thing as "Today's my lucky day" or "I'm hot tonight".


On Mobility

* Avoid putting down roots. They impede motion.

* Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia.

* Never hesitate to abandon a venture if something more attractive comes into view.


On Intuition

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

* Never confuse a hunch with a hope.


On the Occult

* If astrology worked, all astrologers would be rich.

* A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.


On Optimism & Pessimism

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


On Consensus

* Disregard the majority opinion. It is probably wrong.

* Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.


On Stubbornness

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

* Never try to save a bad investment by "averaging down".


On Planning

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


jfi

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