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The Little Book That Still Beats the Market?
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16 reviews of this product found across Reddit:
If you want to learn how to manage an individual stock portfolio I say go for it. In a day of dollar investing with no commissions, $900 is more than enough to get started. Chuck (Schwab), for instance, will let you buy a stake in a company for five bucks. But get educated.
Start by reading this book:The Little Book That (Still) Beats the Market
Really surprised you don't have Greenblatt's book The Little Book That Still Beats The Market (updated version from the original).
It's a staple for value investing and it's really an amazing easy to follow/read book for people who are not in to investing. A fairly quick read and really puts some broader concepts into perspective that some have difficulty with like how much things "costs".
The Little Book That Still Beats the Market: Greenblatt, Joel, Tobias, Andrew: 8601300286433: Amazon.com: Books
Im reading this one right now - For free from my local library - and they have it as an e-book :)
Check out this book. It breaks down the finance jargon that anyone can understand and teaches you how to see whether a company is worth buying through a couple of stats you can find in any company’s balance sheet.
The Little Book That Still Beats the Market https://www.amazon.com/dp/0470624159/ref=cm_sw_r_cp_api_glc_fabc_tt-8Fb630NFBF
This book talks about perfectly legal ways: http://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159/ref=sr_1_1?ie=UTF8&qid=1456851552&sr=8-1&keywords=the+little+book+that+beats+the+market
There are many studies out that as long as you weigh your portfolio by anything other than market capitalization you can beat the index. But it is only over very long time horizons and quite boring.
You could also randomize your stock selection. Random beats most active managers.
The Little Blue Book That Beats the Market by Joel Greenblatt is a pretty great introduction to the stock market as a whole and the concept of 'value investing'. Don't worry so much about the different types of investing, but it would be a great place to start understanding the the way financial markets work.
>I mean I want to learn it practically starting with small exercises like value this apple tree, then moving onto lemonade stands, then on to basic mom and pop convenience stores, onwards to more and more complex companies and it should all make intuitive sense and and be analytical.
Greenblatt's book takes almost this exact approach to teaching valuation and value investing.
Valuation theory isn't very difficult or hard to learn. Once you learn that, it's important I think to adopt a conservative attitude -- stick with only facts and when presented with a range of probabilities where no value is more likely than another, choose the lowest value. Focus on protecting the downside and you will do fine.
Once you do those two things, successful investing is a matter of studying hard, doing your homework, and not lying/fooling yourself as to the truth.
According to Joel Greenblatt, and I agree, there are two metrics to consider when investing in stocks. The first measures if the business earns an economic rent, and the second measures if the stock is attractively priced:
Return on invested capital (ROIC) = Free cash flow to firm (FCF) divided by invested capital (IC)
Free cash flow yield = Free cash flow to firm divided by enterprise value (EV)
The definitions of the terms above are fluid and vary by different people's interpretation of what's needed to operate the business as a going concern, but preference is as follows (you can create your own definitions as long as they are logical):
FCF = Net cash flow from operations plus after-tax interest expense minus depreciation & amortization (Note: I am subtracting depreciation & amortization and not the conventional subtraction of capital expenditures because I find that subtracting the latter punitively penalizes good growth endeavors - e.g. Amazon)
IC = Total assets for simplicity of calculations (or assets needed to run the business as a going concern if you want to dig into the balance sheet - I count goodwill against the company and include it in the denominator since most mergers are guilty until proven innocent)
EV = Market capitalization of equity plus gross debt minus cash & investments
There are no hard rules as to what level of ROIC and FCFY are worthwhile investments, but in my experience I follow these rules:
ROIC is proven to be consistently greater than 12% over a full business cycle (i.e. 7-10 years)
FCFY is appropriate for the given growth rate of future expected FCF and future re-investment opportunities available to the firm (i.e. I am happy owning Google with a FCFY of 4% given its sustainable competitive advantages, growth rate, and re-investment opportunities; whereas, I would not be happy owning Procter & Gamble with a FCFY of 7%)
Happy to answer any follow-up questions.
Oddly enough the sidebar on /r/investing has a bunch of good resources (albeit not organized in any way).
However you're going to need context...a knowledge scaffolding to hang those resources on...to compare them.
Here's what I would do.
- Put yourself through one free online course on fundamentals of investing, such as this one from MIT (https://ocw.mit.edu/courses/sloan-school-of-management/15-401-finance-theory-i-fall-2008/)
There are others: https://www.edx.org/search?q=investment (any foundational one here) (https://ocw.mit.edu/courses/sloan-school-of-management/15-433-investments-spring-2003/) or you can pay Harvard $3000 to teach you the same thing. https://pll.harvard.edu/course/investment-theory-and-applications-0?delta=2
Bottom line, this gives you a foundational knowledge so that when you read things like Warren Buffet's shareholder letters you will have full context for what they're talking about, how to check their math for your own situation, and how to do it yourself.
From there, here's the stuff that stands out to me:
Warren Buffet's letters - https://www.berkshirehathaway.com/letters/letters.html
books on investing: https://www.pdfdrive.com/the-clash-of-the-cultures-investment-vs-speculation-e184446739.html , https://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159 , https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393358380 , https://www.amazon.com/Security-Analysis-Sidney-Cottle/dp/0070132356
Hedge fund manager's process doing due diligence: https://www.wallstreetoasis.com/forums/on-the-job-with-simple-as-my-research-process
Tax implications: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement#Assigning_asset_classes_to_different_accounts
Asset allocation: https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts#Portfolio_3_-_Spread_asset_allocation There are various subreddits but I mostly suggest you ignore them. (such as /r/stockmarket /r/options /r/thetagang /r/investing /r/bogleheads etc. Mostly they serve to field very low end questions and I would trust them as little as you trust anybody who stops you in the middle of the street to give investing advice...which is to say not at all.)
At this point you might start trying to pick stocks/bonds/funds/whatever. HOWEVER (THIS IS VERY IMPORTANT) I list all these things because I think you should understand them, not because I think you should do them. Unless you want to quit your job and become a full time investor (and maybe even then) my advice is to buy and hold indexes.
The reason I list all of the above is that you'll need it to understand why I give the advice in the sentence above and take it on more than just faith. Check it yourself with your new knowledge and I think you'll agree it's the way to go.
https://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159?ref_=d6k_applink_bb_marketplace
I'm buying 30 stocks for $1k each month each for 2 years. Just wanted to try it out. There's a website that gives you the stocks to buy more or less. It's all beaten down companies that have good ROI. The theory is that ok average this kind of portfolio outperforms the market.
https://www.magicformulainvesting.com/
(you have to create an account, but it's free and I haven't found any downside to it)
The way I do it isn't exactly how the book recommends it, but I found it easier to manage that way.
FYI for those that haven't seen this pic before:
The one just to the right of the third BH book that you can barely see is The Little Book That Beats the Market"
https://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159
This link is to a sequel, I guess (note the still.)
On the green one, I never found the exact book but looks like it may be one on Korean philosophy.
These might help you:
The Little Blue Book That Beats The Market https://www.amazon.com/Little-Book-Still-Beats-Market/dp/0470624159
You want objective criteria backed by solid research, and lucky for you there's been quite a bit. Some books to read:
The Little Book that Still Beats the Market
Of course there are already stock screening services that apply a lot of the strategies in these books, but if you want to buy data and figure out your own strategies, these books also tell you a lot of pitfalls to avoid.
You should check out this site.
https://www.magicformulainvesting.com
It was created by Joel Greenblatt using the formulas he developed in his book The Little Book That Still Beats the Market
It's like a modern day value investing. The methodology can be found here. His website can be found here
You'll need to sign up(free), but after signing up you can generate a list of companies that fit the profile. I've been following this site for a number of years, and in terms of long term investing it works really well.
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