Nick Atkeson - Win By Not Losing: A Disciplined Approach to Building and Protecting Your Wealth in the Stock Market by Managing Your Risk

Copyright 2014 by Nicholas Atkeson and Andrew Houghton. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher.

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To Shawn for his incredible generosity and
support over the years
and
To C.J. for hiring us as stock jocks

CHAPTER ONE
The Story of Sonny

CHAPTER TWO
The Nature of Streaks

CHAPTER THREE
Why Should We Invest?

CHAPTER FOUR
The Story of Mr. M

CHAPTER FIVE
Building Blocks

CHAPTER SIX
The Story of Modern Finance Theory

CHAPTER SEVEN
The Story of Mike

CHAPTER EIGHT
Style

CHAPTER NINE
Your Brain on Stocks

CHAPTER TEN
Observations from the Trading Floor of an Investment Bank

CHAPTER ELEVEN
Risk

CHAPTER TWELVE
A History of Mutual Funds and the Story of Jeffrey Vinik

CHAPTER THIRTEEN
Paradigm Shift

CHAPTER FOURTEEN
The Story of Neil Peplinski and Good Harbor

CHAPTER FIFTEEN
What Is Tactical Investing?

CHAPTER SIXTEEN
The Story of Vinay Munikoti

CHAPTER SEVENTEEN
Capturing the Ups and Missing the Downs: Five Steps

CHAPTER EIGHTEEN
Do Enough to Make a Difference

CHAPTER NINETEEN
Knowing If It Works: Attribution Analysis

CHAPTER TWENTY
Seeing the Forest for the Fees

CHAPTER TWENTY-ONE
Parting Shot

AS COFOUNDER and chairman emeritus of the MoneyShow, the largest self-directed investor conference series in the world, I have spent the past 35 years helping individual investors find winning investment strategies. During these four decades, I have often been frustrated that the retail investment industry for the most part has provided cookie-cutter-type advice involving allocating your hard-won savings into standardized mass-market investment products that are ill suited to handle rapidly changing market conditions.

Unfortunately, many of you have been poorly served by your financial advisors. There is an awakening going on caused by the lack of stock market appreciation over the last 12 years and the shock of a more than 50 percent stock market crash in 20072009. Your retirement savings, your childrens education funds, and your overall wealth have not advanced in more than a decade. Something is wrong. What financial advisors have been preaching is not working.

It turns out that what seems wrong is actually quite normal when you look at long-term stock market supercycles. Over the last 112 years of the Dow Jones Industrial Average, there have been four periods of 17 to 25 years in which the market has shown no meaningful appreciation and experienced high volatility.

When I first met Nick and Andrew, they were speakers on a panel discussion, talking about asset allocation in the new investment environment at the World MoneyShow in Orlando. I have moderated hundreds of these panel discussions, and virtually all the advice provided to investors comes down to grin and bear it during the hard times in the stock market. When I heard stock managers Nick and Andrew say without hesitation that there are times when you should not own any stocks, I nearly fell out of my chair. Finally, someone was stating the obvious. Here were advisors focused not just on fee collection but on absolute returns. I could not wait to hear what they had to say next.

What Nick and Andrew show you in this book is how to take a completely different approach to investing. They show you how to look at the investment world from the standpoint of how much money might I lose? rather than how much money might I make? By protecting your capital first, you will learn how to make a fortune. Chasing return often leads to the poorhouse, whereas protecting capital is Warren Buffetts first and second rule of investing.