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

Marvin Appel does a very thorough job covering ETFs. His book is surprisingly wide-ranging. On the one hand, he explains some very basic concepts, for example explaining a bid-ask spread. On the other, he gets into the sophisticated details of ETF composition. This book is a like a small ETF encyclopedia. Well done!

The book covers ETF for investors - new or not - and does a very good job at explaining risk and volatility. From my point of view, it's more than just ETF and "how to", but also a good background on historical behavior of markets and a review of "well known facts". For example, read the following excerpt from page 69: "Since the start of 1941 - a period of 65 years - there have been 35 market corrections of 10 percent or more in the S & P 500, representing one correction every 1.9 years on the average..." Conclusion page 70: "Identify the worst period for each of the investments you are comparing..." and a question (page 70): "What if your investment was not around during a bear market?" (like the new ETF's offered) In addition, there are data tables and graphs (for the ones inclined to look at hard data). By the way, if you assume that investing in ETF's is superior to a mutual fund investment, think again. See page 22: "As already discussed, ETF share prices are sensitive to the balance between supply and demand - a risk absent from regular mutual funds. ---- "The result is that at the time you are most anxious to sell, you might not be able to get a fair price (relative to the value of the underlying shares) as you thought you would." All in all, a good reading on markets and new investment vehicles like ETF's.

The growth of Exchange Traded Funds (ETFs) to more than 300 valued at over $350 billion with another 300 in registration, coupled with exploding investor interest in these funds, has resulted in a handful of books being published on the subject. Dr. Marvin Appel's new 13- chapter book is the best of the bunch from all perspectives. He is the son of Gerald Appel (the developer of the MACD indicator and his business partner. Gerald has also just penned his newest book titled "Opportunity Investing" which is a perfect complement to Marvin's book. The author first explains how ETFs work and how they are different from traditional mutual funds, and then reviews the different types (fixed income; large, small, and madcap growth and value). Appel then provides detailed insight into investment risk and risk-adjusted performance. Diversification is next up, and Appel illustrates the performance of an ETF portfolio consisting of REITs, S & P 500 F and small cap from 1997-2005. Additionally, he delineates a six-step process to produce an optimal ETF portfolio. Appel provides investors with a very conservative "one-decision" portfolio requiring a minimal time commitment. Performance date from 1981-2005 is presented which illustrates the compound annual return of 10.7%. This ETF portfolio's composition was 30% US T-bills (cash equivalent), 20% investment grade bonds, 20% S & P 500, 20% REITs and 10% small caps. Interestingly, the only losing years were 1990 (-1.5%) and 2002 (-2.3%). Appel recommends rebalancing after one year and one day to gain favorable long-term capital gains tax treatment. Additionally, he advocates switching on a yearly basis between the Russell 1000 (large cap) and Russell 2000 (small cap) to take advantage of a stronger trend in place from the prior year for the stronger of the two indices. Using this approach adds 2.2-2.7% a year to the returns which when compounded produces significant incremental returns not attainable by just sticking with one index all the way. To complete the ETF selection process, he shows how to select between growth and value ETFs using a common relative strength approach (dividing one index by the other to see which is stronger) for small, midcap and large cap ETFs. Finally in chapter 10, Appel adds international ETFs into the mix. He explains the intricacies, risks and costs of investing in this ETF category. Investors should be aware of the high correlation of international and domestic ETFs which sometimes does not add value in a declining market environment. However, there are periods when international ETFs perform better than the S & P 500 for example, and it pays to use relative strength analysis to stay with the outperforming category until the trend reverses. According to Appel, interest rates play a critical role in stock market performance over time. The key is to determine if rates are rising or falling and whether the U.S. Treasury is borrowing short- or long-term. He explain

Dr. Marvin Appel has written a wonderful book that explains the basics of an ETF, talks about its difference between a mutual fund, and goes into diversification amongst ETFs and complete investment strategies. This book includes large amounts of historical data to back up his ideas as well as easy to follow strategies that will apply to many different investors. Although some of his examples do not include total transaction costs, they serve an important purpose of explaining the value of active asset allocation. Altogether this is an excellent book that I would recommend to all investors wanting to take charge of their investments and see how they can do better with ETFs!

From the introduction to ETFs to ultimate ETFs investing strategies, Dr. Marvin Appel explains his concepts in an easy to understand manner. Dr. Appel wrote a practical book with great coverage of historical data and comprehensive researches. I believe his insights are useful for various investors. Especially, for those who would like to allocate asset into ETFs and improve investment performance, this is a must-read.