“Beating the Market, 3 Months as a Time” is the title of Gerald and Marvin Appel’s new book. The thesis of the book can be explained in a few paragraphs and it goes like this.
“Once every three months, you should select from among the best-performing ETFs from the last quarter to hold in your portfolio for the coming quarter.” That is the key Appel & Appel idea. One selects two ETFs from five basic equity investment styles and they are as follows. I am including the Vanguard equivalent.
- U.S. large-cap value (VTV)
- U.S large-cap growth (VUG)
- U.S. small-cap value (VBR)
- U.S. small-cap growth (VBK)
- International (VEU)
Of interest would be data that included mid-cap value and mid-cap growth, REITs, and emerging markets. Then invest in three or four of the nine best performing ETFs. Yes, it is a little more complicated, but not a significant complication.
Lowell Herr
Photograph: Overlooking the Sacred Valley of Peru out to the Andes to the west.
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We are closely watching the RSI and MACD technical indicators to see when it is appropriate to add more shares of ETFs, assuming one has excess cash to put to use in equities.
Here is an example of what we are waiting for. Click on this link and you will see several graphs for VOE, Vanguard’s Mid-Cap Value ETF. Note the RSI graph is below the 30% line, indicating this ETF is oversold. The gamble is when to buy back in. 1) Place a limit order at this point and wait for the price to be struck. 2) Wait for the price to move the RSI graph from below to above the 30% line and then buy when the MACD turns positive.
For the MACD to turn positive, we need to wait for the black line to move from below to above the red line. If this were to happen, there is no guarantee the MACD will not “whipsaw” and turn negative. However, when the RSI is this low and all other signals are also negative, it is only a matter of time until things get better. If the RSI for any of the ETFs of interest were to move below the 20% line, then raise all the cash possible and put in orders for ETFs in that condition.
It appears as if we may be days, if not a few weeks away from a buying opportunity. It is time to stay vigilant.
Watch for the resulting trades within the Premium Content.
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Lowell Herr
Photograph: This is where the “salt stream” comes out of the mountain providing salt for Peru and for export.
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This is just a reminder to let readers know the “Creme & Sour” lists are now available via Premium Content. The “Top Ten” should be published early this week.
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Lowell Herr
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