The X-Discipline

When was the last time your broker called to tell you to sell?

During the 32-month bear market between March 2000 and March 2003, "buy and hold" advice from brokers and financial advisors failed to stem portfolio losses ranging from 40 to 80%. People lost money for one reason: they failed to sell. There's no safe haven where you can buy a stock and forget about it. Have you lost faith in the individuals and institutions that recommended your investments? Are you looking for a better way?

This rare, realistic book offers a, unique, practical alternative depending on others for advice and to the risks, effort, and time involved in managing a stock portfolio yourself. This book is specific - instead of the usual bland list, the author escorts you into the internals of websites with down-to-the-mouseclick procedures for extracting what you need to make clear-cut decisions. He helps you build two essential (but usually omitted) skills for investing: how to critically read the news and control your emotions. His disciplined approach to selling works under all economic conditions to protect you against market downturns; yet, the search that yields high-performing low-volatility funds requires only moderately frequent trading and only about one hour a week of your time. The method frees you from the brokers and financial advisors who have not the skills, methods, or incentive to tell you when to sell - and eliminates their exorbitant fees.

With numerous examples and detailed guidance, The X-Discipline shows you how to anticipate market moves by understanding the impact of news events. It helps you resist the temptation to react emotionally when the market gets volatile or turns against you. No longer dependent on others' advice, you can use ultra-discount brokers to trade low cost efficiently-run funds.

Synopsis of the Book

The X-Discipline is organized into four Parts that let you to use it in different ways. If you want to sit down and surf your way through the steps, start with Chapter 1 and work through to Chapter 7. Your first session will take two to three hours, during which you will find the dogs in your portfolio and build a list of potential winners. With repetition, running through the five steps will require only a few minutes weekly. Because it focuses on process, Part 1 is light on explanation. Each Part 1 chapter has a Part 2 counterpart that goes into greater detail on the origin and reasoning behind the strategy and on potential problems. You can read Part 2 sequentially or use it as a reference.

If you want to learn about The X-Discipline before adopting it, begin with Chapter 8 in Part 2. Part 3 has additional studies and time saving information, and Part 4 gives specific procedures for accessing websites. Updates to Part 4, which will change as websites change, are available on www.x-discipline.com

Part 1: Immediate Results!

Chapter 1: Charting Basics describes the use of charts to identify and measure trends, applying a technique used by experienced traders to identify trend reversals, which are key buy or sell signals.

Chapter 2/Step 1: Determine the Market Stage helps you use the trend of the NASDAQ Composite Index to determine the "Stage" of the market, which helps you decide how much of your capital to put at risk.

Chapter 3/Step 2a: Finding Mutual and ETF Winners introduces fund screeners, for exchange-traded and mutual funds. These online applications produce a list of the best performing funds during the most recent one to three months.

Chapter 4/Step 2b&c: Selecting the Best of the Best shows you how to use the relative strength chart application to trade off high performance and low volatility, and how to eliminate mutual funds having undesirable attributes.

Chapter 5/Step 3: Sell - Before You Buy describes planning your exit strategy, detecting failing performance and deciding whether when to sell.

Chapter 6/Step 4: Review the News. News moves prices, and more of your decisions will turn out right if you consider real world factors. Chapter 6 shows you how to go online for quick news updates, to employ critical thinking to assess the relevance and influence of what you read, and to create personal "outlook statement," that summarizes where you think markets are headed.

Chapter 7/Step 5: Taking Action. If you did not have emotions, Chapter 7 would be one sentence: "Click on sell." This chapter helps you deal with the fear that grips you when you actually have to commit to your plan.

Part 2: The X-Discipline explained

Chapter 8: The Case for Disciplined Investing presents the strategy of the X-Discipline, reviews market action over the last five years, shows how holding during a major downturn can create a severe loss, and gives an example of how selecting top performing funds at key times can generate high returns.

Chapter 9: Funds: The Good, the Bad, and the Ugly examines the relationship between risk and volatility, presents the case for using no-load mutual and exchange-traded funds as your primary investment vehicle, and provides a different perspective for you as a fund owner: the manager of your investment team. The chapter also explains the complex topic of fund costs and the Morningstar system for categorizing funds.

Chapter 10: Why Your Broker Doesn't Call describes how brokers operate, deals with the housekeeping necessary before you commit real money, helps you determine how much you have available to invest, and explains how to diversify. It explains tax issues and the types of accounts, the services needed from your broker, and how to avoid broker transaction fees.

Chapter 11: Measuring the Market explains in detail the significance of long- and short-term trends and shows you how to gauge the mood of the markets to determine the percentage of your assets to put at risk. Sometimes, your best investment is cash.

Chapter 12: The Challenges of Fund Screening is the first of three chapters that cover three phases of qualifying funds as "buy candidates." It gives detailed examples on how to search for funds and guides you in selecting the best screener for your needs.

Chapter 13: Excluding Volatility shows you how to visually identify volatile or weak funds through an example using the relative strength chart application.

Chapter 14: The Pre-Flight Checkup discusses key facts to check on any fund before you buy.

Chapter 15: The Art of Firing a Portfolio Manager revisits selling with a detailed analysis and addresses with examples the interpretation of charts under volatile and non-volatile conditions.

Chapter 16: Nuclear War and Other Negatives discusses how to employ critical thinking to use the news to arrive at your own opinion. Without an independent opinion on how to approach the markets, you will tend to follow other people's ideas in place of your own strategy.

Chapter 17: Investing is Emotional! explains the emotions that affect investors, points out that failure to control them will take you off your plan, and offers suggestions on how to understand them and regain control.

Chapter 18: Tracking Your Portfolio introduces a method to track progress, balance your portfolio, and act on sell signals.

Chapter 19: Bond Funds: An Equity Alternative. The recent long-term bear market made the case for investing in bond funds - under the right circumstances. This chapter shows you when to be in bond funds and how to find and evaluate them.

Part 3: The Appendices

Appendix 1: The Internet Bubble is a case study that follows the NASDAQ Composite Index through the bull market run up and the dot-com crash, showing you how the X-Discipli