Opportunity Investing

About the Author

Gerald Appel is a renowned author and lecturer, celebrated for his expertise in the financial markets. He is the founder and president of Signalert Corporation, an investment advisory firm managing over $350 million in client assets. Additionally, Appel publishes the technical newsletter "Systems and Forecasts," where he shares his insights and strategies with a broad audience. With decades of experience in observing, researching, and tracking financial markets, Appel has developed a keen sense of identifying profitable opportunities amidst the ever-changing economic landscape.

Main Idea

In Opportunity Investing, Gerald Appel provides a comprehensive guide for investors to spot opportunities in financial markets under various economic conditions. Integrating techniques of both technical and fundamental analysis, Appel's methods are designed to work in any market scenario. The book emphasizes the importance of diversification, timing strategies, and the selection of investments across a wide range of asset classes, including stocks, bonds, mutual funds, commodities, and real estate-related instruments.

Table of Contents

1. The Myth of Buy and Hold
2. Putting Together a Winning Portfolio
3. Selecting Mutual Funds Most Likely to Succeed
4. Income Investing - Safer and Steady ... But ...
5. Securing Junk Bond Yields at Treasury Bond Risks
6. The Wonderful World of Exchange-Traded Funds
7. A Three-Pronged Approach to Timing the Markets
8. Time Cycles, Market Breadth, Bottom-Finding Strategies
9. Investing in REITs
10. Opportunities Abroad
11. Trading Strategies to Get the Most from Closed-End Mutual Funds
12. Bonds and Bond Funds for All Seasons

Analyzing and Explaining Each Idea

The Myth of Buy and Hold

Appel challenges the conventional wisdom of the "buy and hold" strategy, arguing that it exposes investors to significant risks. While holding stocks long-term is often seen as a safe bet, Appel explains that economic growth, reflected in stock prices, can be unpredictable. Diversifying investments across various markets and asset classes is crucial to achieving desired capital growth rates. Successful market timing and well-considered diversification can enhance returns and mitigate risks.

"Successful market timing, like well-considered diversification, can help you to both increase returns from your investments and to reduce risks associated with buy and hold investments." - Gerald Appel

For instance, investing solely in the U.S. stock market might not yield the capital growth needed for future expenses. Instead, a diversified approach, including international markets and various asset classes, can provide a more stable financial future. Appel's insights guide investors to understand the dynamic nature of markets and the necessity of adapting strategies to changing conditions.

Putting Together a Winning Portfolio

Creating a balanced, diversified portfolio is key to consistent returns and manageable risk. Appel emphasizes that many investors accumulate portfolios haphazardly, influenced by market trends and fads, rather than through deliberate strategy. A well-constructed portfolio should reflect good principles of capital management, balancing average rates of return and risk. Mutual funds are highlighted as excellent tools for diversification, allowing investors to rebalance and adjust their portfolios easily in response to market changes.

"A portfolio of mutual funds representing diverse investments may be readily rebalanced, reapportioned and adjusted in accordance with a changing market." - Gerald Appel

Appel advocates for a strategic approach to portfolio construction:

• Identify investment goals and risk tolerance.
• Choose a mix of asset classes to spread risk.
• Regularly review and rebalance the portfolio to align with changing market conditions and personal financial goals.

This approach ensures that investors maintain a balanced and diversified portfolio, capable of weathering various market environments.

Selecting Mutual Funds Most Likely to Succeed

Appel advises investors to be cautious of mutual fund ratings and hidden fees. Lower expense ratios often indicate better performance, and funds with lower volatility are generally preferable. The Triple Period Selection (TPS) strategy is a simple screening method to identify mutual funds that consistently outperform the S&P 500 Index while minimizing risk. The Sharpe ratio is used to measure risk-adjusted performance, helping investors determine if their returns justify the risks taken.