The Little Book That Still Beats the Market (Little Books. Big Profits)

At 80, I have just discovered this book and enjoyed it more than any other book I've read (well, at least more than any book I REMEMBER reading). The book starts slow, as if to disguise how good it really is. By chapter 6 I was laughing out loud, at the statistical simplicity, shear elegance, and ironic effectiveness of this investment approach. I've a masters in general experimental psychology and have taught graduate level statistics, so I have some background from which to reasonably allege that this is a great book. Don't miss it. Don't let the negative reviews dissuade you. This is a sincere book written by an obvious expert who has the humility to acknowledge the well established fact that most investment advisors can't beat the market. He's come up with a simple method that works, tested it, and is sharing it. You probably won't do better than this. Yet of course you probably will think you can. Which is what makes this so much fun. Is it statistics, investing advice, psychology, or zen? Just read it - and if you do, don't miss the depth that's disguised with simplicity. Don't miss the irony of a guy who wrote this to explain why you probably can't do any better than this who then spends his career managing investment funds. And writing more books. If you don't think THAT is humor, rate yourself dull normal at best! Enjoy. If you don't enjoy this book, feel free to write a scathing review of this review!

I have not read a book so clear and straight forward as this in regards to investing in the stock market. Some nice use of puns to get the point across and a solid and SIMPLE plan to get your investment and financial freedom on track. Thank you for sharing. This will be implemented immediately!

The "Little Book That Beats the Market" is a short, digestible book that outlines Joel Greenblatt's "magical formula investing" theory. What is the magical formula? Comprised of two simple metrics (return on capital and earnings yield), the magical formula is an investment-screening tool designed to identify companies with better than average earning power that are for sale at a lower than average price (i.e. ones that present a "value" buying opportunity). The formula is in many ways a distillation of the teachings of Benjamin Graham (whose ideas influenced Warren Buffet) into a more populist and palatable form. To determine what companies are better than average, Mr. Greenblatt uses a "return on capital" metric. To gauge attractiveness of price, Greenblatt looks at "earning yield". The Appendix of the book outlines how it is he calculates both of these metrics. The magic formula then screens for the 20-30 stocks that have the highest ranking, when you look at all the stocks combined return on capital and earnings yield. If these concepts are new to you, Greenblatt goes so far as to even show the results of this screen on an ongoing basis on his Magic Formula website. For a more experienced investor, for someone who has read books on investing (and particularly those on value investing- Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor , The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) , The Essays of Warren Buffett: Lessons for Corporate America, Second Edition , Value Investing: Tools and Techniques for Intelligent Investment , even Joel Greenblatt's You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits ), this book will not seem the best of use of time. This is an "introduction to investing" type book. Which is not to say, the ideas of this book are not important, but only that for the more experienced students of investing, this review combined with a look at Greenblatt's Magic Formula website and maybe the Appendix of this book would be enough to get the essence of the "Little Book" without having to read it in its entirety. Mr. Greenblatt's investing concept of "magic formula investing" while simple has held up well over time. Why? The formula's difficulty is not in its construction, but rather in its implementation. What makes the prevalence of these value opportunities possible is the very human nature and institutional constraints that make them difficult to implement. To help with this, Mr. Greenblatt and colleagues have now made their investment theory "investable" through either self-directed or professionally managed accounts. The funds have been available since 2009. The verdict? They are up until now beating the market. For an introduction to a simple but effective investment approach that seems to perform well over time, this book- readable in an afternoon's sitting- is worth a glance. For more experienced investors, spending thirty minutes on the Internet will probably get you to the same place.

This book was fun to read, since the author has a good sense of humor. It is well explained and clear step by step guide is provided.

Great book. Highly recommended. Unfortunately, I ordered from Amazon and they sold and delivered a water damaged book as “new.” Buyer beware. Amazon apparently doesnt have the best qc.

This book is really instructive, if you are a investor who have problems with how to choose stocks , then I will 100% recommend it to you! With the magic formula which the book mentions, you will able to choose the correct stocks and more, you don't have to focus on the stock market every day with fear--you just have to buy the magic formula stocks, then wait for the money to start rolling into your budget! This book is also a good beginner"s guide. It covers some basics, like putting the money in the bank, and bonds, and finally explaining that investing is the best solution to your money! And more, this book is written with humor, so anybody, even children will enjoy it very much. If you are a parent who wants your child to learn investing, then you should buy this book as a present for your child. One thing I want to say is this book is quite outdated (although just 12 years or so), like the author said that the US government bond is 6 percent, but it is much lower nowadays. But considering all things, I would say that this is definitely a good investing book, and therefore you should buy it immediately!

I first read this six years ago and I've re-read it roughly one a year since. In my view this is an investment classic. His target audience is his teenage children, and he's a wickedly funny writer - so the book is an easy read. For a technical book, that's quite an achievement. He starts out by explaining the basics of safe investing - banks accounts and government bonds. Then he moves into riskier investing in businesses via the stock market. He gives a great explanation of how a business works, via the fictional "Jason's Gum Shops" and "Just Broccoli". While doing that, he explains what the key fundamental data means e.g. sales, cost of sales, earnings, income. We're eased into the technicalities by reading the story. Ben Graham's "Mr Market" and "margin of safety" then make an appearance, placing Greenblatt firmly in the value investing camp. But he explains that value investing isn't easy, and you're up against finance professionals. He's come up with a "Magic Formula" for us to use. It's been heavily and successfully back tested. Yet in concept it's very simple: a) Find the earnings yield of companies, and sort them from highest to lowest. Give the best score of 1, the next a score of 2, and so on. This searches for the best bargains. b) Find the return on assets for the same companies, and create a new list sorted by ROA. Again, give them scores, 1 for the best, etc. This searches for great companies. c) Add these two numbers together to get the company's magic formula score. This gives great companies at relatively cheap prices. d) Buy the top 30 companies. This creates a portfolio, to minimise risk. e) Sell them after 12 months, and repeat. I forward tested it back in 2010, reviewing the results a year later. Some companies did badly, some extraordinarily well - as Greenblatt predicted. The key was the portfolio did well. It did slightly better than the S&P 500. I noticed that some of the performance was driven by two or three companies which were taken over. I've repeated the exercise in following years, when it also did well. It's easy to find US companies which fit the bill - he shows you on his website. For UK stocks, you can get them via the "ShareScope" app. If you're into value investing, you should take a look at this book. If you want your children to understand the stock market and invest for their future, you can't go wrong with this.

Simple and straight to the point. An essential part of anyone's library, let alone investors...

It's so give you a basic idea about how stock market with and how to find companies to invest and how long should you invest. You will not become a investment wizard after reading this, but it will give you a head start. You can't solely rely on this book, but this book will help to understand the advanced books you'll read later. I'm planning to read another book "InvestED".

A must read for any serious investor.

It’s a must read for all investors in general, especially new investors.