Opportunity Investing

Chapter 1: The Myth of Buy and Hold 1

Variable Rates of Return from Stocks 3

Speculative Bubbles Are Often Followed by

Years of Below-Average Investment Performance 5

The Moral of the Story—Be a Flexible,

Opportunistic Investor 6

Growth Targets—“The Magic 20” 7

Growth Target Zone 8

Active as Opposed to Passive Management of Assets 9

Diversification—A Major Key to Successful Investing 10

Geographic Diversification in the

Developing Global Economy 10

Diversifying Geographically in Foreign Bond Markets

as well as in Domestic Income Investments 12

Sector Diversification for Smoother

Performance and Risk Reduction 13

Income Investing—Time Diversification 16

Creating a Bond Time Ladder 17

Year-by-Year Management of the Bond Ladder 18

Increasing Returns from the Stock Market

while Reducing Risk 19

Useful Market Mood Indicators That You Can

Maintain and Use in Just a Few Minutes Each Week 20

Illustrations of Mood Indicators 20

Relationships of Price Movements on NASDAQ

and the New York Stock Exchange 23

How to Identify Periods When NASDAQ

Is the Stronger Market Area 25

General Suggestions 28

Chapter 2: Putting Together a Winning Portfolio 29

Which Investments Have Paid Off the Best? 30

Life May Not Be So Predictable After All 31

The Moral of the Story 31

And Perhaps Most Important 32

The Best Places to Put Your Money in Recent Decades 32

Implications for Mutual Fund Selection 33

Mutual Funds Provide Excellent

Vehicles for Your Diversification Program 34

Benefits of Using Mutual Funds for Both

Financial- and Nonfinancial-Based Investing 34

Mutual Fund Selections for All Seasons 35

Periods of Rising Interest Rates 35

Periods of Falling Interest Rates 36

A Quick and Dirty Way to Determine

Trends in Interest Rates 37

Summing Up 38

Creating and Measuring the Performance of

Well-Balanced Diversified Investment Portfolios 38

The Basic Portfolio Mix 39

Summing Up 41

Income Investing 41

Diversification Certainly Does Appear to Help the Cause! 44

Upping the Ante! Increasing Returns and Reducing Risk

through Active Management of Your Diversified Portfolio 45

Employing Mutual Funds to Carry Out Sector

Diversification 46

The Selection of Specific Mutual Funds 47

Comparing Performance—The Diversified Portfolio,

Buy and Hold, Versus the Vanguard Standard & Poor’s

500 Index Fund 48

Rebalancing the Portfolio to Improve Returns 49

An Object in Motion Tends to Stay in Motion 49

The Basic Procedure for Rebalancing

Your Sector Portfolio 50

Year-by-Year Comparative Results 52

A Final Thought 54

Chapter 3: Selecting Mutual Funds Most

Likely to Succeed 57

Myths and Merits of Morningstar 58

A Quick and Dirty Checklist to Locate the

Best Mutual Funds 60

Expense Ratios and Portfolio Turnover—

the Lower the Better 60

No-Load Funds Are Likely to Outperform Load Funds 61

Verify That Your Brokerage House Is Giving You

the Best Deal, Not Just Upping Its Own Commission 62

As a General Rule, the Lower the Fund Volatility,

the Better 63

With Excellent Market Timing, Some Higher-Velocity

Vehicles in Your Portfolio Might Prove Advantageous 64

Continuity of Management Is Important 64

Putting Together and Maintaining a Mutual Fund

Portfolio for Long-Term, Tax-Favored Holding Periods 66

The TPS Strategy: Selecting Mutual Funds That

Qualify for the “One-in-a-Thousand Club” 66

Managing Your Buy and Hold Portfolio 73

Putting Together and Maintaining a Portfolio of Strong

Mutual Funds for Intermediate-Term Investment 74