Sectors & Styles: A New Approach to Outperforming the Market
By Vincent Catalano, CFA
John Wiley & Sons Inc.
198 pages, $60
REVIEWED BY LESLIE N. MASONSON
Catalano puts forth the premise that three developments: the PC, the Internet and ETFs have made investing easier for professional and serious non-professionals, this book’s intended audience. Unfortunately, Catalano spends a disproportionate 38 pages on the importance of understanding the global economy, compared to a scant nine pages on ETFs, and 15 pages discussing technical analysis divergences, sentiment, VIX, mutual fund flows and investor psychology.
The most practical chapter provides interesting insights on effective portfolio management based on the investor’s risk tolerance. Portfolio development is briefly covered in a three-step scenario: asset allocation, portfolio construction and portfolio changes. Investors can use this information to construct a portfolio based upon their assets, financial objectives, lifestyle, future retirement needs and changing life circumstances.
According to Catalano, constructing the portfolio requires selecting a core of economic sectors, and then adding a group of sectors, industries or stocks that the investor prefers. He provides examples of a few portfolio weightings.
In a chapter focusing on the PC and Internet, Catalano provides a handful of well-known Web sites and includes a description of data rich sites such as the Federal Reserve Bank (federalreserve.gov) and less well-known sites, such as www.firstgov.com, along with a number of institutions and foundations. He suggests that investors download critical information, read and study it. Unfortunately, he does not prioritize the data or the sites, so the reader is left with a huge database but not with enough knowledge to do anything profitable with it.
Catalano has written a pensive book on investing with emphasis on economic and fundamental factors. As far as providing readers with a straightforward, easy-to-use methodology on selecting appropriate sectors and styles and making portfolio changes, the author falls short. As the author himself concedes, putting together a portfolio with the principles outlined in the book “is conceptually easy but extremely difficult to do measurably.” And that’s the challenge. For me, the process was too time-consuming and not clear-cut.
Leslie N. Masonson is president of Cash Management Resources, a financial consulting firm and the author of “All About Market Timing” and “Day Trading on the Edge.”