Book Review: 'iMoney: Profitable ETF Strategies'

We recently reviewed Tom Lydon and John Wasik’s excellent ETF book, iMoney: Profitable ETF Strategies for Every Investor and deem this superb ETF resource as the most reader and user-friendly book on exchange-traded funds published to date.

Chapter 1 presents a perfunctory, but pleasantly concise, historical summary of ETF evolution. Chapter 2 reveals the authors’ bias toward traditional indexed ETFs. However, it also juxtaposes the goals, benefits and disadvantages of traditional indexing versus the newer fundamentally-weighted indices for ETFs. The authors simply conclude that the vote is out, the battle of index methods will continue, and we will just have to wait and see which ones survive.

Chapters 3-5 offer a treasure of pithy guidelines and instructions about small to large cap US ETFs, the pros and cons of value versus growth ETFs, and an excellent summary of sector ETF selections. Chapters 6-7 discuss several alternative asset classes including precious metals, commodities, and currency ETFs.

Income-oriented investors will especially appreciate Chapter 8 with its thorough review of fixed income vehicles including municipal, corporate and government bond ETFs. This chapter also tackles the ETFs' step-sister, ETNs (exchange-traded notes). With ETNs experiencing the cloud of IRS tax scrutiny and their ultimate backing by banks alone, it is wise that Tom and John include this section in their book.

Chapter 9 briefly reviews the availability and visibility of using ETFs in 401(K) and IRA accounts. Given recent market volatility and risk both in the US and internationally, Chapter 10 is a must read for investors who may want to hedge their portfolios against downside risk. Short selling with ETFs is discussed and there is a brief primer about inverse ETFs, a way to benefit from market declines without the possible pitfalls of short selling strategies.

We believe that the most valuable part of Lydon and Wasik’s iMoney book is in their final chapter 12. They reveal how to create your own personalized buy, hold and sell strategy using ETFs. Trend tracking, proper asset allocation, and when to “do it yourself” or hire a professional financial advisor are topics they present in a particularly helpful manner. A thorough and useful guideline utilizing an ETF’s 200-day moving average tells when to buy and sell your ETFs. They also discuss trailing stop losses (they recommend around 8%) and amazingly, when to buy back into an ETF once you have been stopped out (we have observed that investment advice rarely tells us when to sell and almost never provides insight about when to buy back in. Refreshing!).

Finally, iMoney directs us to simple implementation model ETF portfolios for differing levels of investor risk tolerance. Included is an excellent, thorough 20-page section of ETFs lists, resources and references for further reading.

All in all, we rate Tom Lydon and John Wasik’s iMoney: Profitable ETF Strategies for Every Investor a MUST-READ for any serious ETF investor.

• AMAZON.COM (direct link to book)
• ETF TRENDS (link to Tom Lydon’s newsletter service)
• GLOBAL TRENDS (link to Tom Lydon’s investment service site)
• ABOUT ETFs AWARDS (article page for ETF books reviewed on Mr. Carson’s website)