Magic Formula Investing is a value investing method that is pretty simple, and outperforms most anything else. It looks at companies that generate a good return on investment, and buys them when they're on sale. If you go to MagicFormulaInvesting.com, you can even get the list of companies to buy stock in, for free! Sounds pretty simple, right? We'll see...
The Magic Formula is explained in Joel Greenblatt's Little Book:
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3 comments:
what bullshit. "magic formula investing", just another over-talkative blobsite full of unqualified pronouncements on how investing is really by self-proclaimed pros.
i get it: let the zeccoites have use of my cash forever and pay me a substandard return, with me hoping that i'll make it up with my 5 trades a year. yeah right.
Actually, the "magic formula" is pretty simple, and doesn't require professional ability. It basically comes down to buying shares of companies with a high return on assets at a bargain (determined by using earnings yield). Joel Greenblatt shows how to do the calculations yourself, and also how to use online screening tools to find qualifying companies. It's pretty basic value investing, and simple enough for an amateur.
As for Zecco, you get 10 free trades a day, or 40 a month, whichever comes first. The method Greenblatt laid out in his book results in about 60 trades in a year, because you're buying 30 different companies throughout the year, holding them for about a year, and selling them at that time. I wouldn't use Zecco as a place to park cash; that's what ING and Emigrant Direct are for.
Hi,
I would advice to read ‘The little book..’ before calling Joel Greenblatt a ‘self-proclaimed pro’ (which he is definitely not). He is a great value investor, and became a billionaire by investing (not by selling books).
I highly recommend his book. The strategy can be seen as somewhat comparable with Warren Buffett’s. Personally I differentiate from the books ‘advice’ to pick stocks randomly out of the selection. I believe with knowledge of businesses one could select the most promising ones, which will lead to additional returns (this is the way Greenblatt uses the screen himself)..
I have written some revealing reports on how to know which stocks to select: www.magicformulastocks.com Also in these reports I give clues on further ways of generating extra return (the reports are for free).
Success in investing,
Hendrik Oude Nijhuis
www.magicformulastocks.com
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