Opportunity Investing: How to Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … and Every Time in Between

Opportunity Investing: How to Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … and Every Time in Between

by Gerald Appel
Released September 2006
Publisher(s): Pearson
ISBN: 0131721291

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Book description

“A guide that will turn readers into smart and savvy investors.  Appel, author of several successful books on investing and editor of the leading technical analysis publication Systems and Forecasts, offers readers even more hot investment tips in his latest offering. Here, he shows readers how to read and recognize the economic climate, and demonstrates how to invest accordingly. After teaching how to understand the character of the market, Appel offers tried-and-true strategies that will help you make high-return, low-risk investments using mutual funds, exchange-traded funds (ETFs) and real investment trusts. He also provides solid advice on how to invest in foreign markets, taking advantage of often overlooked investment opportunities abroad. Investments in real estate, precious metals and other commodities also receive coverage, and Appel offers useful web resources for further research. The author has more than 40 years of experience, and his love of teaching the trade is conveyed through his enthusiasm and thorough explanations.  Both amateurs and experienced investors who are looking for a competitive edge will appreciate this information-packed guide to making wise investments in any economic climate.”  --Kirkus Reports

In Opportunity Investing, you are shown which investments provide the best returns in varying economic climates, how to recognize and take advantage of investment opportunities overseas as well as investment opportunities within the United States. Specific strategies for identifying the strongest mutual funds and stock market sectors are provided, as well as strategies for periods when interest rates either rise or fall. Tools are provided to identify periods when stocks and/or other investment options are likely to advance, periods when market outlooks are more cloudy, and strategies that suggest changes in portfolio allocation that may be made accordingly. Other areas discussed include real estate, precious metals and other commodities, and investments that bring in high and steady levels of income.

Table of contents

  1. Copyright
    1. Dedication
  2. Financial Times Press
  3. Acknowledgments
  4. Introduction: New Opportunities
    1. The Need for Active Management
    2. Active, Informed, Self-Management
    3. How This Book Will Help
  5. 1. The Myth of Buy and Hold
    1. Variable Rates of Return From Stocks
    2. Speculative Bubbles Are Often Followed by Years of Below-Average Investment Performance
    3. The Moral of the Story—Be a Flexible, Opportunistic Investor
    4. Growth Targets—“The Magic 20”
    5. Growth Target Zone
    6. Active as Opposed to Passive Management of Assets
    7. Diversification—A Major Key to Successful Investing
      1. Geographic Diversification in the Developing Global Economy
      2. Diversifying Geographically in Foreign Bond Markets as well as in Domestic Income Investments
      3. Sector Diversification for Smoother Performance and Risk Reduction
    8. Income Investing—Time Diversification
    9. Creating a Bond Time Ladder
      1. Year-by-Year Management of the Bond Ladder
    10. Increasing Returns from the Stock Market while Reducing Risk
    11. Useful Market Mood Indicators That You Can Maintain and Use in Just a Few Minutes Each Week
      1. Illustrations of Mood Indicators
        1. Public Psychology Mood Indicator
        2. Interest Rate Indicators
        3. Seasonal Mood Indicators
        4. A Great Market Mood Indicator: The NASDAQ/NYSE Index Relative Strength Indicator
    12. Relationships of Price Movements on NASDAQ and the New York Stock Exchange
    13. How to Identify Periods When NASDAQ Is the Stronger Market Area
    14. General Suggestions
  6. 2. Putting Together a Winning Portfolio
    1. Which Investments Have Paid Off the Best?
    2. Life May Not Be So Predictable After All
      1. The Moral of the Story
      2. And Perhaps Most Important
    3. The Best Places to Put Your Money in Recent Decades
    4. Implications for Mutual Fund Selection
      1. Mutual Funds Provide Excellent Vehicles for Your Diversification Program
      2. Benefits of Using Mutual Funds for Both Financial- and Nonfinancial-Based Investing
    5. Mutual Fund Selections for All Seasons
      1. Periods of Rising Interest Rates
        1. Rising Interest Rates Often Coincide with Inflationary Price Pressures
        2. Places to Put Your Money When Prices Are Rising Rapidly
      2. Periods of Falling Interest Rates
      3. A Quick and Dirty Way to Determine Trends in Interest Rates
      4. Summing Up
    6. Creating and Measuring the Performance of Well-Balanced Diversified Investment Portfolios
      1. The Basic Portfolio Mix
      2. Summing Up
    7. Income Investing
    8. Diversification Certainly Does Appear to Help the Cause!
    9. Upping the Ante! Increasing Returns and Reducing Risk through Active Management of Your Diversified Portfolio
    10. Employing Mutual Funds to Carry Out Sector Diversification
      1. The Selection of Specific Mutual Funds
    11. Comparing Performance—The Diversified Portfolio, Buy and Hold, Versus the Vanguard Standard & Poor’s 500 Index Fund
    12. Rebalancing the Portfolio to Improve Returns
      1. An Object in Motion Tends to Stay in Motion
      2. The Basic Procedure for Rebalancing Your Sector Portfolio
      3. Year-by-Year Comparative Results
    13. A Final Thought
  7. 3. Selecting Mutual Funds most likely to Succeed
    1. Myths and Merits of Morningstar
    2. A Quick and Dirty Checklist to Locate the Best Mutual Funds
      1. Expense Ratios and Portfolio Turnover—the Lower the Better
      2. No-Load Funds Are Likely to Outperform Load Funds
      3. Verify That Your Brokerage House Is Giving You the Best Deal, Not Just Upping Its Own Commission
      4. As a General Rule, the Lower the Fund Volatility, the Better
      5. With Excellent Market Timing, Some Higher-Velocity Vehicles in Your Portfolio Might Prove Advantageous
      6. Continuity of Management Is Important
    3. Putting Together and Maintaining a Mutual Fund Portfolio for Long-term, Tax-Favored Holding Periods
      1. The TPS Strategy: Selecting Mutual Funds That Qualify for the “One-in-a-Thousand Club”
        1. Performance Criteria
        2. Risk:Adjusted Performance Ratio—Superior Sharpe Ratio Levels
          1. Have Your Investment Returns Been Worth the Risk?
          2. Caveat
          3. Understanding Excess Return Compared to Risk Levels
          4. For Further Information Regarding the Sharpe Ratio
          5. Sharpe Ratio Levels Required to Qualify a Mutual Fund for the One-in-a-Thousand Club
    4. Managing Your Buy and Hold Portfolio
    5. Putting Together and Maintaining a Portfolio of Strong Mutual Funds for Intermediate-Term Investment
      1. Rotating Your Portfolio at Regular Intervals to Maintain a Portfolio of Market Leaders
        1. Isolate the Safer Group of Mutual Funds in Which to Invest
        2. Ranking the Funds for Performance
    6. Outperforming Typical Mutual Funds
    7. Past Performance
    8. Upping the Ante with a Double-Period Ranking Model
    9. Examining the Statistical Comparisons, Decile by Decile
    10. Diversification Will Almost Certainly Help the Cause
      1. Conclusion
    11. Getting the Maximum Bang from the Bucks in Your 401K Plan and Other Tax-Sheltered Investment Portfolios
      1. Special Advantages of 401K Plans for Active Mutual Fund Management
      2. One Final Thought
      3. One Final Test—Confirming with T. Rowe Price
  8. 4. Income Investing—Safer and Steady … But Watch out for the Pitfalls
    1. The Four Legs of Your Investment Portfolio
    2. Dealing with Default Risk
      1. Bond Duration as a Measure of Risk
    3. Securing Higher Rates of Return from Lower-Quality, Investment-Grade Bonds
      1. Understanding the Total Income Return from Bonds
    4. Investing in Bonds via Mutual Funds vs. Investing on Your Own
    5. Bonds and Bond Funds for All Seasons
      1. Money-Market Funds
        1. Positive
        2. Negative
        3. When to Buy
      2. U.S. Treasury Bills
        1. Positive
        2. Negative
        3. On Balance
      3. Short-Term Bonds and Bond Funds
        1. Positive
        2. Negative
        3. When to Buy
      4. Intermediate-Term Bond Funds and Individual Bonds
        1. Positive
        2. Negative
        3. When to Buy
      5. Long-Term Government and Corporate Bonds
        1. Positive
        2. Negative
      6. Treasury Inflation-Protected Securities (TIPS)
        1. Positive
        2. Negative
      7. Zero-Coupon Bonds
        1. Positive
        2. Negative
      8. Municipal Bonds: Winning the Tax Game
        1. Suitability for Retirement Accounts
        2. Municipal Bond Mutual Funds and Trusts Viable Alternatives to Individual Bonds
      9. High-Yield Bonds and Bond Funds
        1. Best Time to Buy
        2. Best Time to Sell
        3. Historical Examples
        4. Positive
        5. Negative
    6. Summing Up
  9. 5. Securing Junk Bond Yields at Treasury Bond Risk
    1. The 1.25/0.50 Timing Model
      1. Signals
        1. Timing Decisions
        2. Tracking Total Return
          1. Rule 1: Timing
        3. Rule 2: Buy/Sell
    2. Calculating Buy/Sell Levels for Funds with Prices That Are Reduced When Dividends Are Paid
      1. Example A
      2. Reviewing the Procedure One Final Time
    3. Handling High-Yield Funds That Do Not Reflect Interest Income in Their Share Pricing
      1. Example B
      2. Performance of the 1.25/0.50 Timing Model
    4. Comparing Results
    5. Summing Up
  10. 6. The Wonderful World of Exchange-Traded Funds
    1. Enter the Exchange-Traded Funds (ETFs)
    2. Pros and Cons of ETFs
      1. Pros
        1. Diversification: Many Different Stocks in One Investment Vehicle
        2. Lower Management Costs
        3. More-Favorable Tax Treatment
        4. Liquidity and Portfolio Visibility
        5. Asset Allocation and Portfolio Control
      2. Cons
        1. Transaction Costs and Bid-Asked Spreads
        2. Trades That Vary from Net Asset Value
        3. Other Caveats
    3. A Closer Look at the ETF Universe
      1. Income ETFs
      2. Global Investment
      3. Domestic Market Indices
      4. Specific Overseas Countries
      5. Specific Industry Groups
    4. Miscellanea
    5. Creating Complete, Well-Diversified Portfolios
    6. Creating and Maintaining Your ETF-Based Portfolio
      1. Large Cap vs. Small Cap
        1. Overall Results
        2. Comments
    7. Using ETFs as Hedges Against Inflation
    8. Sample Portfolios
      1. The Conservative Investor
      2. The Moderate Investor
      3. The Aggressive Investor
    9. Summing Up
  11. 7. A Three-Pronged Approach to Timing the Markets
    1. Common Measures of Valuation
    2. Company Earnings: The Core Fundamental
      1. The Long-Term Correlation Between Corporate Earnings and Changes in Stock Prices
    3. Opportunity Investing Strategy 1
      1. Price/Earnings Patterns
      2. Riskier Periods
    4. Using Bond Yields to Know When to Buy Stocks
    5. Earnings Yield
    6. Opportunity Investing Strategy 2
      1. Finding the Data You Need
      2. Special Observation
      3. Trailing Earnings vs. Forward Earnings
      4. Indicator Implications
    7. Bond Yield: Earnings Yield Comparisons Using Aaa Bond Yields
      1. Stocks Bullish 1974–1980
      2. A Significant Buying Opportunity?
    8. Ten-Year Treasury Bond Yields vs. Earning Yields
    9. Surprise! Buy Stocks When Earnings News Is Bad, Sell When Earnings News Is Best
  12. 8. Time Cycles, Market Breadth, and Bottom-Finding Strategies
    1. Market Cycles
    2. The Granddaddy of All Key Stock Market Cycles: The Four-Year (Presidential) Stock Market Cycle!
      1. Confirming the Four-Year Cycle with Your Price/Earnings Ratio Indicator
    3. The Link Between the Four-Year Market Cycle and the Presidential Election Cycle
      1. Winning with Investments Based on the Presidential Election Cycle
    4. Market Breadth
      1. Market Breadth and Major Market Indices
      2. Capitalization Weighted
      3. Confirming Price Action of Major and Less-Major Market Indices with “Breadth” Indicators
      4. The Advance-Decline Line
      5. The New High—New Low Breadth Indicator—Including the Major Bull Market Confirming 28% Buy Signal!
        1. Bullish and Bearish Indications
      6. Bottom-Finding Parameters
      7. Significant Buying Pattern
      8. Cautionary Conditions Indicated by New High—New Low Data
      9. The 28% Major-Term New Highs Buy Signal
    5. Summing Up
  13. 9. Cashing In on the Real Estate Boom—Investing in REITs
    1. REITs Provide Steady and High Rates of Ongoing Income
    2. Types of REITs
      1. Closed-End REIT Mutual Funds
    3. REIT ETFs
    4. long-term Performance of REITs
      1. The Price Movement of the REIT Index Alone Does Not Tell the Full Story
    5. Dividend Payout by Type of REITs
    6. Timing Your Entries and Exits
      1. Links Between REITs and Interest Rates
      2. For Long-Term Investment, Track the Major Channel of the REIT Sector
      3. Unfavorable Implications
    7. Selecting the Best Apartments in the REIT Apartment Building
      1. Technical Tactics
      2. Fundamental Strategies
        1. Minimum Dividend Yield
        2. Dividends Should Show a History of Consistent Growth
        3. Avoid REIT Companies Rated as “Sells” by Wall Street Analysts
        4. Earnings per Share Growth Estimated to Be at Least 5% for the Coming 5 Years
      3. Further Information
    8. Summing Up
  14. 10. Opportunities Abroad—Investing from Brazil to Britain
    1. Emerging Markets
    2. Many Overseas Markets Outperform the U.S. Stock Market
      1. Long-Term Results Reflect the Potential in Foreign Stocks
    3. Participating in the Growth of Overseas Stocks
      1. American Depository Receipts
      2. Overseas-Based ETFs vs. Open-Ended International Mutual Funds
      3. Closed-End Overseas Mutual Funds
        1. Pros
        2. Cons
        3. Playing the Premium-Discount Game Once More
    4. When to Invest in Overseas Equity Mutual Funds and ETFs
    5. Which International Funds to Buy
    6. Investing in International Bond Mutual Funds for Income and for Currency Protection/Speculation
      1. Open-End International Mutual Fund Investment
      2. Higher-Quality International Bond Funds
      3. Lower-Quality International Bond Funds
      4. Closed-End Bond Funds
    7. Balancing the Risks and the Potential Reward
    8. Ongoing Currency Diversification Is a Useful Strategy in and of Itself
    9. Your Best Approaches to Overseas Opportunities
  15. 11. How to Get the Most from Closed-End Mutual Funds
    1. Open-End Mutual Funds
    2. Unit Investment Trusts
    3. Closed-End Funds
    4. How to Buy $1 Worth of Stock or Bonds for Only 85 Cents!
      1. Discounts Mean Opportunity
      2. Finding the Special Bargains
      3. Larger-Than-Average Discounts from Net Asset Value Provide Increased Safety as Well as Increased Opportunity for Profit
      4. Taking Advantage of Premium-Discount Relationships
      5. Leverage Means Increased Opportunity but Also Increased Volatility and Risk
    5. Strongly Performing Closed-End Mutual Funds
  16. 12. Inflation—Coexisting and Even Profiting with Inflation
    1. What Is Inflation?
    2. The Benefits of Inflation
    3. Runaway Inflation
    4. Dealing with Inflation
      1. Income Investment—Borrow Long Term, Lend Short Term
    5. Adjustable-Rate Bonds—Pretty Good, but Beware of the Joker in the Deck
    6. Commodity Investment—an Ongoing Hedge Against Inflation
      1. Benefiting from Rising Commodity Prices
        1. Pimco Commodity Real Return Strategy/A
        2. Oppenheimer Real Asset A
        3. Potomac Commodity Bull and Rydex Srs Tr: Commodities/A
        4. Van Eck Global Hard Assets Fund/A
        5. iShares Goldman Sachs Natural Resources Index Fund
        6. Summing Up
    7. Final Thoughts
  17. 13. Reviewing Our Array of Opportunity Strategies
    1. Ideally Achieved Investment Goals
    2. Strategies to Control Risk
    3. Investment Climates and Recommended Investments
      1. Periods of Sharply Rising Prices
      2. Periods of Steady but Moderate Inflation
      3. Periods of Deflation—Prices Decline
        1. Favorable Investments
        2. Unfavorable Investments
    4. Specific Investment Strategies
      1. Timing the Stock Market
      2. Timing Investments in the Bond Markets
      3. Selecting Mutual Funds and Other Investments
    5. The Basic Five-Step Investment Sequence
    6. Suggested Reading
      1. Periodicals
      2. Books
      3. Newsletters

Product information

  • Title: Opportunity Investing: How to Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … and Every Time in Between
  • Author(s): Gerald Appel
  • Release date: September 2006
  • Publisher(s): Pearson
  • ISBN: 0131721291