The Zurich Axioms: Secrets of the Swiss Investment Bankers

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

Each principle deals with an emotion, and a possible error. Some of his language you may quibble with. Investments involve chance and probability, like gambling, but the expectations are on your side and you might be doing collective economic good, rather than just your entertainment. I am a managed futures investor, and find this a useful book to read every few years to reground my perspective on risk management. You can do all the calculations and due diligence you like, but in the end it is your judgment, instinct and probabilities. The book has become rare a few times and quite expensive at the rare book shops.

This book really opened my eyes to the importance of taking risks and taking one's losses gracefully and quickly. The book also speaks about the risks of so-called low risk approaches. If one doesn't have much calculated risks are the way to go. The book is positive and upbeat. I read it more than 10 years ago and it is a book I turn to again and again.

No nonsense clearly articulated principles of investing, devoid of technical jargon, unsupported theories and self-congratulatory braggadocio. The book is written in an engaging, mildly cynical way that resembles a father teaching his son the main principles of the investing process - as the author apparently learned them from his Swiss banker father. The main topic is the mindset and philosophy of successful speculators and investors and the major traps to watch out for when engaged in this activity. Very general advice - there are no spesific recommendations for any stocks, etc. This is an outstanding book for individuals who want to develop a rational basis for their investment activities.