The Little Book that Still Beats the Market
The Little Book that Still beats the Market is a short piece of writing that presents clear and simple explanations of the basics of investing and how the stock market works. Through his years of experience and expertise, Joel Greenblatt has constructed a “magic formula” that promises to deliver above-average returns on your investment in the long run. In this paper, I will discuss several topics that include: a summary of the book, what I found most exciting about the book, the magic formula and several stocks that I picked out using the magic formula investing website.
To open up the book, Greenblatt illustrates a situation in which a boy at school sells bubble gum to his peers at school. This situation then evolves to a point in which the Greenblatt and the young school boy are trying to determine the value of his business. We soon learn that determining the value of any business is the first step in efficiently investing.
Greenblatt briefly covers the different ways in which one can store their money. Several options included: a mattress, the bank, the government or individual firms. The idea of putting your money under your mattress is by far, the worst option possible. This is because the money under your mattress does not collect any interest, nor does it elude the cost of inflation. A more efficient way to invest your money is to do it through the government, bank or corporation. All of these choices are superior for a few reasons. If you chose to put your money into the bank, the Federal Deposit Insurance Corporation (FDIC) will insure your account for up to $250,000. This is a pretty safe investment considering the guarantee of the FDIC and the solid interest rate provided by the bank. However, the safest investment is to put money into the government. This is because are permitted to print money and collect taxes and therefore considered risk free. If you are feeling a bit more risky or want an...
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