It says put your money at risk. Don’t be afraid of getting hurt a little. The degree of risk you will usually be dealing with is not hair-raisingly high. By being willing to face it, you give yourself the only realistic chance you have of rising above the great unrich. The price you pay for this glorious chance is a state of worry. But this worry, the First Axiom insists, is not the sickness modern psychology believes it to be. It is the hot and tart sauce of life. Once you get used to it, you enjoy it. This is inverse of Buddhist philosophy of the less you own, the less you will have to worry about.
- If you bet $100 and double your-money, you’re still poor.
- Major flaws in Diversification:
- It forces you to violate the precept of Minor Axiom I – that you should always play for meaningful stakes.
- By diversifying, you create a situation in which gains and losses are likely to cancel each other out. Leaving you exactly where you began - at Point Zero
- By diversifying, you become a juggler trying to keep too many balls in the air all at once.
- Greed, in the context of the Second Axiom, means excessive acquisitiveness: wanting more, more, always more. It means wanting more than you came in for or more than you have a right to expect. It means losing control of your desire.
- Don’t stretch your luck. Expect winning streaks to be short. When you reach a previously decided-upon ending position, cash out and walk away.
- And when you’ve sold, don’t torment yourself if the winning set continues without you. In all likelihood it won’t continue long.
- One excellent way to reinforce the ‘ending’ feeling is to rig up some kind of reward for yourself. A medal, if you will.
- Dont wait around when trouble shows itself. Get away from it promptly. Don't hope, don't pray. Hope and prayer are nice, no doubt, but they are not useful as tools of a speculative operation.
- Ask yourself whether the developing problem is likely to get fixed. Look for trustworthy and tangible evidence that improvement is on the way, and if you see none, take action without further delay. Calmly and deliberately before everybody else has started to panic, jump off the ship and save yourself.
- The fear of regret of a loser will turn into a winner after you’ve gone away. But that is seldom a wise course where your money is concerned.
- The need to abandon part of an investment. This is inordinately painful to some. To console you, however, I can tell you that it gets less painful with practice.
- The third obstacle to the Third Axiom’s implementation is the difficulty of admitting you were wrong. - you should explore yourself and seek ways to handle it.
Minor Axiom IV: Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.
- Ideally we should welcome our small losses, since they protect us from large losses.
- It is of the utmost importance that you never take economists, market advisers, or other financial oracles seriously.
- It is easy to get dazzled by a successful prophet, especially in the world of money.
- Forecasts of physical events (weather, tide tables, sun rise) can be trusted, but the stock market (colossal engine of human emotion) can not be predicted.
- Don't see order where order does not exist, but study the speculative medium and take best shot and remember it is still a chance even though you have studied it.
- Wrong believe that the orderly repetition of history allows for accurate forecasting in certain situations.
- Making charts of stock prices is like making charts of ocean froth. You’ll see each pattern once, and then it will be gone.
- Even the most rational minds perceives links of cause and effect where none exist. When we have to, we invent them, since we are order-seeking humans.
- The incorrect belief that, if a particular event occurs more frequently than normal during the past, it is less likely to happen in the future (or vice versa), when it has otherwise been established that the probability of such events does not depend on what has happened in the past.
- Dont get stuck into being surrounded by the old, the familiar, and the comfortable
- You must stay footloose, ready to jump away from trouble or seize opportunities quickly.
Minor Axiom IX: Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia
- It is a mistake to let yourself get too attached to any physical thing in which your capital is invested. Get attached to people, but not to houses or neighborhoods.
- Getting attached to things decreases your mobility, the capacity to move fast when the need arises.
- Trust a hunch only if you can explain it.
- Put your hunch to the test, to improve the odds in your favor.
- No matter how good a hunch feels, don’t let it lull you into a state of overconfidence. Stay worried.
- Examine hunch with extra care and double one's guard in case of trouble
- God may do much for you, but one thing He plainly isn’t concerned about is the size of your bank account.
- Money and the supernatural are an explosive mixture that can blow up in your face. Keep the two worlds apart.
- Every occult practitioner can come up with at least one good story about a lucky hit. But hold tight to your skepticism and your money.
Minor Axiom XIII: A superstition need not be exorcised. It can be enjoyed, provided it is kept in its place.
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
- Never make a move if you are merely optimistic. Before committing your money to a venture, ask how you will save yourself if things go wrong. Once you have that clearly worked out, you’ve got something better than optimism. You’ve got confidence.
- Majority pressure can not only dislodge a good hunch; it can even make us doubt ourselves when we know we’re right, since arguing with a majority is enormously hard.
- Best defense against majority pressure is the simple awareness of its existence and coercive power.
Minor Axiom XIV: Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.
- This dosent mean blindly do what majority isn't dong, it means resist majority pressure and study situation yourself.
- Obsession clouds one's judgment and fogs the vision.
- The loss-averaging technique is like the roulette systems since it will work sometimes when you are lucky, which adds to its allure.
- Cost-averaging clouds one’s judgment.
- Encourages you to disregard the important Third Axiom, on hope: when the ship starts to sink, don’t pray. Jump.
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.
- Do not get rooted in long-range plans or long-term investments. Instead react to events as they unfold in the present.