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Investing with Exchange Traded Funds Made Easy: Higher Returns with Lower Costs—Do It Yourself Strategies Without Paying Fund Managers

Book Description

“Do not hesitate to buy this book, it will make you money!”

            --Ike Iossif,President/Chief Investment Officer,Aegean Capital Group, Inc. 

ETFs offer exceptionally low expenses, outstanding performance, and unparalleled transparency. But, the number and variety of choices can be overwhelming. Now, one of the field's leading experts cuts through the ETF hype, offering a start-to-finish plan for choosing the right ETFs and using them to beat the market, year after year.

Dr. Marvin Appel explains exactly how ETFs work, what they can and cannot do, and why they’re not all equally attractive. Then, drawing on objective data and proven, back-tested strategies, he shows you how you can quickly move into the right ETFs at the right time, consistently staying on the winning side of major market trends.

Appel illuminates every facet of ETF investing: quantifying potential risk and reward, using ETFs to improve diversification, implementing simple ”active strategies,” deciding when to move into cash, and more. He also presents a full chapter on international ETF investing, as well as a discussion on how ETF investing can reduce your taxes.

From start to finish, this book candidly assesses risks, costs, and rewards, helping you become an informed ETF consumer and a powerfully effective ETF investor.

  • Use ETFs to invest like the big players

  • Drive down costs and fully leverage diversification, the only “free lunch” on Wall Street

  • Learn what your investment advisors won’t tell you

  • The objective truth about ETF costs, risks, and opportunities

  • Build your “one-decision” portfolio

  • Profitable investing has never been this easy

  • Drive even greater profits with proven “active” strategies

  • Simple asset allocation strategies you can implement in just minutes

  • Choose ETFs that match your investment style

  • Build a profitable portfolio you’re comfortable with

  • “Today, exchange-traded funds are the most innovative and rapidly growing investment vehicles. Marvin Appel’s new book provides, in a highly readable framework, a wealth of information on what they are and–more importantly–how private and professional investors can use them to build wealth through a simple and easy-to-implement investment program.”

    –C. Michael Carty, Principal and Chief Investment Officer, New Millennium Advisors, LLC

    “In the ever-expanding complex world of ETFs, Marvin Appel has cut through all the fluff and created a one-stop guide to not only using them, but using them profitably. The sections on diversification and the use of relative strength in comparing asset classes are invaluable. Individual investors and financial advisors alike will get a significant return on investment by spending time with this book.”

    –Bob Kargenian, CMT, President/Principal, TABR Capital Management, LLC

    The first step-by-step investment program built around low-cost, top-performance ETFs!

    Back-tested, verifiable strategies from one of the world’s leading ETF experts!

    All you need is a discount brokerage account, a few minutes on the Internet each month, and this book!

    ETFs give investors the best of all worlds: instant diversification, unprecedented flexibility for profiting from market shifts, and incredibly low costs. Now, there’s a step-by-step, plain-English guide to profiting from ETFs from one of the world’s leading experts.

    Chapter 1 Exchange-Traded Funds (ETFs): Now Individuals Can Invest Like the Big Players

    Chapter 2 The Multifaceted Stock Market: A Guide to Different Investment Styles

    Chapter 3 A One-Step Strategy for Selecting Superior Investments: Indexing

    Chapter 4 Investment Risk: A Visit to the Dark Side

    Chapter 5 How Well Are Your Investments Really Doing? Risk-Adjusted Performance

    Chapter 6 Diversification: The Only Free Lunch on Wall Street

    Chapter 7 The One-Decision Portfolio

    Chapter 8 When to Live Large: An Asset Allocation Model for Small- Versus Large-Cap ETFs

    Chapter 9 Boring Bargains or Hot Prospects? Choosing Between Growth and Value ETFs

    Chapter 10 When Is It Safe to Drink the Water? International Investing

    Chapter 11 What Bonds Can Tell You About Stocks: How to Use Interest Rates

    Chapter 12 It’s a Jungle Out There: Selecting from Among Different ETFs with Similar Investment Objectives

    Chapter 13 The Ultimate ETF Investment Program in Just 30 Minutes Per Month

    Appendix Internet Resources for ETF Investors

    Index

    Table of Contents

    1. Copyright
      1. Dedication
    2. Financial Times Press
    3. Acknowledgments
    4. About the Author
    5. 1. Exchange-Traded Funds (ETFs): Now Individuals Can Invest Like the Big Players
      1. ETFs Are a Special Type of Mutual Fund
      2. ETFs Avoid the Expense of Fund Managers
      3. ETFs Are Traded on Exchanges
      4. ETF Investors Have Hidden Costs Through the Bid-Ask Spread
      5. The Creation/Redemption Process Keeps ETF Share Prices Close to the Market Value of the Underlying Shares
      6. ETF Performance Is Not Weighed Down by Transaction Costs
      7. ETF Shares Are Often More Tax-Efficient Than Mutual Funds
      8. Special Risks of ETFs
      9. Conclusion
      10. Endnotes
    6. 2. The Multifaceted Stock Market: A Guide to Different Investment Styles
      1. The First Decision: Stocks, Bonds, or Cash
      2. Size Matters
      3. Each Investment Style Has Multiple ETFs
        1. Midcap ETFs
        2. All-Cap or Total-Market ETFs
        3. Growth and Value ETFs
      4. Conclusion
      5. Endnotes
    7. 3. A One-Step Strategy for Selecting Superior Investments: Indexing
      1. Investments That Track Market Indexes Have Outperformed Most Mutual Funds
      2. The Evidence in Favor of Indexing
      3. Indexing Has Delivered Greater Profits Than the Average Mutual Fund, Except in the Small-Cap Area
      4. How a Few Mutual Fund Managers Have Beaten the Indexes
      5. Conclusion
      6. Appendix 3—Index Construction Methodologies
        1. Example of Index Construction—Equal Weighting
        2. Example of Index Construction—Price Weighting
        3. Example of Index Construction—Capitalization Weighting
        4. The Newest Indexing Scheme—Free-Float Weighting
      7. Endnotes
    8. 4. Investment Risk: A Visit to the Dark Side
      1. Drawdown—An Intuitive Measure of Investment Risk
        1. How to Use Drawdown
      2. A 40-Year History of Bear Markets
      3. What if Your Investment Was Not Around During a Bear Market?
      4. Example of Risk Assessment: An Emerging Market ETF
      5. Market Risks and Planning for Your Future
      6. Appendix 4A: Where to Find Quantitative Investment Risk Information
      7. Appendix 4B: Calculation of Drawdown with a Spreadsheet
      8. Appendix 4C: Volatility of Past Returns as a Risk Measure
      9. Endnotes
    9. 5. How Well Are Your Investments Really Doing? Risk-Adjusted Performance
      1. The First Risk-Adjusted Performance Measure—Annual Gain-to-Drawdown Ratio
      2. Another Risk-Adjusted Performance Measure—The Sharpe Ratio
      3. Risk-Adjusted Performance Review
      4. Conclusion
      5. Appendix 5A—Calculation of the Compounded Annual Rate of Return
      6. Appendix 5B—Calculation of the Sharpe Ratio
      7. Endnote
    10. 6. Diversification: The Only Free Lunch on Wall Street
      1. Reduce Risk, Not Profits, with Diversification
      2. Diversification Versus Picking Only the Best
      3. How to Determine What Should Be in the Optimal Portfolio
      4. Example—Determining a Good Mix of Stocks and Bonds
      5. Interpretation of the Sharpe Ratio
      6. The Uncertainty of Future Investment Returns
      7. Conclusion
      8. Endnote
    11. 7. The One-Decision Portfolio
      1. A Risk-Reducing Investment Mix
      2. Indexes Used to Test the One-Decision Portfolio
      3. Performance History for the One-Decision Portfolio
      4. The One-Decision Portfolio for Less-Conservative Investors
      5. ETFs You Can Use to Create Your Own One-Decision Portfolio
      6. Rebalancing
      7. Why Only U.S. Investments Are Included in the One-Decision Portfolio
      8. Conclusion
      9. Appendix 7—A Brief Discussion of the Bond Market
      10. Credit Risk
      11. Interest Rate Risk
      12. Intermediate-Term Bond ETFs
      13. Endnotes
    12. 8. When to Live Large: An Asset Allocation Model for Small-Versus Large-Cap ETFs
      1. Why Market Capitalization Matters
      2. Trading Rules
      3. Results
      4. Real-World Implementation with ETFs
      5. Conclusion
      6. Appendix 8—ETF Distributions and Taxes
      7. ETF Share Prices Drop by the Amount of a Distribution
      8. Endnotes
    13. 9. Boring Bargains or Hot Prospects? Choosing Between Growth and Value ETFs
      1. The Concept of Relative Strength
      2. History of Relative Strength Changes Between Growth and Value
      3. Recognizing the Emergence of a New Trend Using the Relative Strength Ratio
      4. Results with Small-Cap Value Versus Growth
      5. Results with Large-Cap Value Versus Large-Cap Growth
      6. Real-World Implementation with ETFs
      7. Conclusion
      8. Endnotes
    14. 10. When Is It Safe to Drink the Water? International Investing
      1. How to Identify Whether the Long-Term Trend Favors U.S. or Foreign Stocks
      2. Results of Using the EAFE/S&P 500 Asset Allocation Model[2]
      3. Outlook for International Investing
      4. Conclusion
      5. Endnotes
    15. 11. What Bonds Can Tell You About Stocks: How to Use Interest Rates
      1. A Basic Introduction to the Bond Market
      2. Why Rising Interest Rates Have Usually (But Not Always) Been Bad for Stocks
      3. An Indicator of Rising Interest Rates
      4. Yield Curve Indicator
        1. Interest Rates and the Implied Economic Forecast
        2. The Rules for the Yield Curve Indicator
        3. Track Record for the Yield Curve Indicator
      5. Composite Interest Rate Indicator
      6. Conclusion
      7. Endnotes
    16. 12. It’s a Jungle Out There: Selecting from Among Different ETFs with Similar Investment Objectives
      1. The Drawdown Chart—A New Tool
      2. Example 1—Small-Cap ETFs
      3. Example 2—Growth Versus Value ETFs
      4. Example 3—Utility Sector ETFs
      5. Conclusion
      6. Endnotes
    17. 13. The Ultimate ETF Investment Program in Just 30 Minutes Per Month
      1. The Ultimate ETF Investment Program
      2. Step 1: Diversification
      3. Step 2: Decide Whether International or U.S. Stocks Are Favored; If U.S. Stocks Are Favored, Evaluate the Interest Rate Climate
      4. Step 3: Select the Best Investment Style from Large-Cap Value, Small-Cap Value, Large-Cap Growth, or Small-Cap Growth
      5. Results of the Ultimate ETF Strategy
      6. Conclusion
      7. Endnotes
    18. Internet Resources for ETF Investors
      1. ETF Sponsor Websites
      2. General ETF Websites
      3. Index Provider Websites
      4. Current and Historical Market Data
      5. Fundamental Economic Data