Not A Clue

I’m a sucker for a fiction novel. Sci-fi, mystery, fantasy or thriller, it doesn’t matter – I’ll read it. Some of the novels I read are masterpieces within their genre; the Conan-Doyle’s, Christie’s and Asimov’s of the literary world. Others are at the ‘trashier’ end of the spectrum; airport novels for the most part.

The problem with the latter is that most of the stories are too similar, the same contrived plot dressed up in different clothes. The vague, familiar nature of the blurbs can make it difficult to establish whether you’ve actually read the book before. Indeed my mother, who shares this fiction predilection, often buys the same book multiple times without realising it.

I usually alternate said fiction with non-fiction, and in more recent years another genre has entered the rotation – the financial.

I’ve read many of the household names of the personal finance literature. Although each book has its own individual take on aspects of investing or personal finance, in many respects they suffer the same issue as those trashy fiction novels. They’re all so similar. Too similar. Beating the same rhythm on the personal finance drum. 

And now, for something completely different

It was, therefore, with interest that I recently read the latest edition of The Zurich Axioms: The Rules of Risk and Reward Used by Generations of Swiss Bankers, which was initially published in 1985.

I won’t dive into a deep dissection of the book, though in essence it describes axioms (self-evident truths) designed to help the active investor succeed in their speculation. It functions on the oft-repeated premise that the goal of investing is to “get rich”. I would argue that in the current clime, where near-non-existent interest rates are hopelessly outstripped by inflation, investing may merely be the only way to avoid becoming poorer, never mind getting rich.

The guide may seem ill-fitting for the ‘casual’ investor who’s following a Bogle-esque strategy, though reflecting on what I had read afterwards, what made the book so illuminating was just that: it was different.

It challenged the truisms and cliches of investing that I, and I’m sure many others, take as gospel. The holy trinity of diversification, low fees and passive indexes. When your investments lose value you avoid the sin of selling – ‘do nothing‘ the congregation chants as the first hints of a bear market approach. 

Alpha comes before beta

The gospel according to the Swiss states that you must belie these restrictive behaviours if you’re to make it large through speculating:

Why only invest what you can afford to lose? Risk-free get-richism is a fallacy. How do you ever hope to win big if you bet so small? 

Why hold onto nosediving investments? Set a loss threshold and sell when it is reached.

Why hold onto skyrocketing stocks that will invariably peak then crash? Set a gain threshold and get out while you’re ahead.

Why diversify, spreading yourself thinly? Instead pick your perceived winners and back those few strongly. 

I won’t engage in a soporific riposte, as I know there are logical counter-arguments to many of these attitudes. Attitudes that are not wholly suitable for the time-poor, amateur investor hoping to ride the passive wave to some meaningful return on investment.  

Whose side are you on? 

I’m not going to suddenly join the alpha cult and stake my carefully curated assets on a handful of dicey self-selected stocks. 

The value in the book was from having my viewpoint, my philosophies challenged. It’s healthy to engage in such self-doubt and introspection. Even it leads to no change in behaviour, the process is still instructive.

Amongst internet echo chambers and a social media sphere all singing from the same hymn sheet, a different tune can be hard to hear. Those that sing them are often drowned out by a barrage of vehement vitriol. There often appears to be no middle ground. 

Cryptocurrency is the germane example. You’re apparently either a crypto zealot who drank the KoolAid and will suffer by purchasing useless nothing. Or you’re an old fogey who can’t feel the sands shifting under their very feet as the decentralised revolution gathers pace. Is there anyone in between?

One axiom to rule them all. 

There’s a phrase that I often think of whenever I engage in thought or action in investing or personal finance:

I have no idea what I’m doing

I think this is my own axiom. My own self-evident, incorrigible truth. I have no idea what I’m doing.

This mantra helps to keep my grounded. I’ve learnt a lot about financial matters in the pay few years, but I’m no guru. Yes I’ve shared bits of my research on aspects of personal finance via this blog, but at the end of the day I’m an amateur. 

With that in mind, it makes sense to continue to read and listen and learn. Except instead of consuming only that which serves to support my existing principles, only that which massages my financial schema with confirmation bias, I should seek out those opposing viewpoints. 

The trashy fiction? That will stay. A brain needs some rest after all.

TTFN,

Mr MedFI. 

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