Hello, I’m Andrew, a software engineer in Fort Worth, TX. This website details my personal experience following the investing strategy presented in Joel Greenblatt’s best-selling book “The Little Book that Beats the Market”. I have never met Mr. Greenblatt and I am not affiliated with him or his company in any way. I simply became intrigued with his strategy and decided to do a little more research (okay, Googling), hoping to find the results of individuals that have followed it. The fact that I came up nearly empty was the impetus of this blog. The book sold hundreds of thousands (or is it millions?) of copies yet it’s surprisingly hard to find real-world testimonials of people like you and me.
Like many software engineers I hang around drinking coffee with guys who love to talk about their latest stock market schemes and strategies, trying to beat the market buying penny stocks or trading options using Iron Condors and Double Calendars. The options income strategy was a huge waste of time for me. Technical Analysis is also nonsense but at least by the time I looked into that I was wise enough to not invest before I researched it more thoroughly. I subscribed to the Motley Fool’s Stock Advisor service for several years and I do not recommend it. Dogs of the Dow made some sense to me but it seems that since the book came out and the time I found out about it much has been written on how it hasn’t fared so well against the S&P 500. Though my ears would always perk up at a new investing idea I pretty much came to the conclusion that the best investing strategy is to simply buy Vanguard’s VTSAX, a low-cost, broad market index fund. That and funds like it still make up the bulk of my portfolio. I’m also a believer in investing in companies that have a long track record of paying relatively high and steadily increasing Dividends.
Crossing Paths with The Little Book that Beats the Market
I stumbled upon The Little Book that Beats the Market by Joel Greenblatt while searching for something else on Amazon.com. The description on Amazon looked interesting, so I checked the book out of my public library. The book fascinated me because:
- It’s easy to understand
- It makes sense
- It presents a well-defined, actionable strategy
- I believe it will outperform the market. Unless Greenblatt totally fabricated his data (and I haven’t heard of any evidence that he has), his Magic Formula investing strategy is the first one I’ve come across that I believe will soundly outperform the S&P 500 as a long-term strategy.
Trust But Verify
While I believe in the strategy, I’m a conservative investor. I’m not going to commit a huge chunk of my portfolio to the Magic Formula. Instead, I’ve decided to invest a small portion of my portfolio to the strategy for at least five years and see how it goes. Despite the popularity of Greenblatt’s book and that it’s been out for around ten years, there seems to be a lack of articles detailing retail investors’ personal experiences following the strategy. I thought it would be worthwhile to give it a go myself and share the results. While planning the best way to set up my study I kept running into small issues and implementation details. This blog aims to address some of these issues and discuss various aspects of the strategy. And the exciting thing is that you can follow my experience and portfolio in real time. Some of my posts are even open for comments so you can give me your thoughts/experience/complaints with the Magic Formula.