Invest to Win: Earn and Keep Profits in Bull and Bear Markets with the GainsMaster Approach by Toni Turner and Gordon Scott (McGraw-Hill, 2013) is a deceptively elementary book. Although its largest audience will undoubtedly be newly self-directed investors, even the experienced investor will learn a thing or two.
The GainsMaster approach has four key elements: (1) define your objectives, (2) evaluate market conditions, (3) choose your opportunities, and (4) manage your risk. Since the inputs to these elements vary from person to person and hence require a level of self-knowledge and self-assessment (“Investing strategies need to be built from the inside out”), each chapter in the book concludes with a section that addresses the emotional side of investing.
The authors cover such basics as finding a broker, fundamental analysis, technical analysis, and ETFs. But perhaps their most useful contribution is their analysis of market conditions—whether investors are seeking safety or opportunity. To ascertain whether the market is in a STOP or a GO mode, they use a combination of three indicators: the twelve-month moving average, volatility as measured by the average true range, and safety-seeking behavior (for instance, how do utility stocks perform compared to the market as a whole?).
Once an investor has evaluated market conditions, one strategy is to turn to lists of ETFs to “select opportunities and also keep an eye on the markets.” (p. 216) The most general list for a GO-sign market includes SPY, DBC, EFA, EEM, and LQD. The investor should determine which are the two strongest ETFs on this list and then drill down, looking for the four strongest ETFs on the two lists. If, for instance, commodities and emerging markets are the strongest, the investor should look for the strongest ETFs among DBC, DBA, DBB, GDX and EEM, EWZ, PIN, RSX, FXI, EWM, EPP, and ILF.
Relative strength is only one of several strategies the authors describe. They also offer two even simpler strategies, for instance, that they call “Keeping It in the Fridge” and “Making Some Dough.”
Invest to Win is a well-balanced book that seeks to improve upon buy-and-hold investing with some market timing and better stock/ETF selection. Investors could do a lot worse than to follow the advice of these two well-known financial educators.