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Review: Beating the Market by Gerald Appel, Marvin Appel

When I was first approached to review the book titled Beating the Market, 3 Months at a Time [3], I thought I was looking at one of those “invest in this hot new sector, you’ll be rich in three months.” Then I saw that the publisher was Financial Times Press and that allayed my concerns some more, FT Press isn’t going to put out some day-trading, hawkerish type book and, this is something I learned later, neither of the authors are your BS snake-oil salesmen types.

The book isn’t about day-trading, though Gerald Appel is well known for his technical analysis and marketing timing (Gerald Appel created the Moving Average Convergence / Divergence [4] technical indicator), but about active investing and how it can yield higher returns than “buy and hold” strategies. By active investing, they mean that you can use their strategy to review your portfolio once ever three months (rather than the often advised once a year rebalancing act). So, through active investing and a one hour review every three months, you can beat the market with their proven investing plan. That’s the promise they’re making.

Basic Investing Education

Beating the Market begins by educating the reader on how to put together an investment portfolio, what your goals should be, how you should approach it, and is generally a good primer on investing in general. For example, it’s important to note that you want to get a rate of return greater than the risk-free investments you have available to you. I could put my funds in an E*Trade Online Savings account [5] and get 3.15% risk-free, so my investments have to beat that. (usually the benchmark is money market funds and 90-day T-bills) Another goal is to manage the risk of your investments, something individual investors are notoriously bad at. Emerging markets are always hot and can return big double digit returns, but they can also lose big doubt digits… are you getting enough return for the risk you’re taking?

It Gets Complicated, Quickly

After the eight page primer on putting together a winning investment portfolio, the books slices right into diversification and risk management. I don’t want to recap the entire book but the topics it covers run the gamut from discussing ETFs and emerging markets, to the purpose of bonds in your portfolio, to special bond market investments, and end with discussions of retirement, planning for the political impacts, and an appendix chock full of resources. There is even a chapter called the Definitive Portfolio in which they build out a well diversified example portfolio with a mix of two types of bonds, two types of ETFs, and one overseas component.

The Investing Plan

So what’s this plan I spoke of earlier? The plan is the whole book. By understanding all the pieces of your portfolio (including risks, investment profiles, and all the nitty gritty described in each chapter) and how diversification works to reduce your risk, you can actively participate in the management of your portfolio without having to pay a manager 1-2% of your investments. That’s what active means in their plan, not day trading.

There’s a lot of information in this book and it’s definitely one I will be reading more closely over the next few weeks. There are discussions about high yield “junk” bonds and about the international markets that I glossed over, two things I know very little about, so if you have it at the library or bookstore (I tend to borrow all my books from the library) I wholeheartedly recommend that you pick it up.