The Little Book That Still Beats The Market - Joel Greenblatt

The Little Book That Still Beats The Market - Joel Greenblatt

Understand all the secrets of profitability, the best deals, and the magic formula followed by the world's greatest investors of all time.

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If you are an entrepreneur but do not manage the stock market well, or are a shareholder but do not manage your own investments, then the book "The Little Book That Still Beats The Market", written by renowned author Joel Greenblatt, was done for you.

Often what is really missing for us to be able to climb the step of success is enough information that can aggregate our learning and lead us to have better decision making about what we really want.

Understand here what are the fundamental points that will teach you how to make money and lead you to be a successful investor.

Let's go!?

The book "The Little Book That Still Beats The Market"

Joel Greenblatt's "The Little Book That Still Beats The Market" (2010) is a guide to victory and success.

Originally released in 2006, Joel provides an updated version of the book with a new introduction and financial techniques to beat the market and broaden your business skills.

The work is considered one of the greatest New York Times bestsellers, and is hailed by The Wall Street Journal and the Financial Times as "the best book on the subject in years."

Who is Joel Greenblatt?

Joel Greenblatt is a graduate of the University of Pennsylvania School of Business. A reference in the business world, Joel is the author of several works focused on investment success and focusing on the stock market.

He is a professor at Columbia Business School, an American writer, and investor. In addition, he is the former president of ATK and founder of Gotham Funds.

To whom is this book indicated?

"The Little Book That Still Beats The Market" is indicated for entrepreneurs and investors who want to remove all their doubts about the universe of equities, how to beat the market and broaden their business skills.

What are the key ideas of the book?

  • Saving money requires discipline;
  • To make money you need skill;
  • The power of bargaining in stock buying;
  • The financial return has nothing to do with luck;
  • Investments require time;
  • Can you identify what are the market averages?;
  • The magic formula doesn't work for years at a time;
  • The market has variable behavior;

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[Book Summary] The Little Book That Still Beats the Market - Joel Greenblatt

Getting rich requires determination

When we want to achieve something big in our lives, we need constant doses of determination, don't we?

Well, it could not be any different from getting rich.

The person who wants to change the standard of living, achieve goals, and plan to live a stable and successful life needs to insist.

The idea of saving for those who want to get rich is valid. Saving is not just about saving money, but above all managing your money wisely. It is to avoid spent, waste and unnecessary purchases.

It is obvious that each one knows their needs, but what is also the fact is that we all know where we are making mistakes in finances.

We long for wealth, but we cannot return home without taking something of our own. We want money, but every day we eat in restaurants. We want to get rich, but we always consume fashion products.

Perhaps what we lack is a dose of organization and determination if, in fact, we have the wealth marathon as one of the targets of our lives.

But understand that not only from saving money lives a successful individual; Investment is required.

Now, answer: Do you analyze the returns on the stock you invest?

The secrets of investing

Joel points out in "The Little Book That Still Beats The Market", that actions are pieces of a company.

It is very important to keep the stock concept in mind before we start any investment.

Stocks are for those people who want to become a bit of a business owner (or a lot, it depends on the amount of stock bought).

But for this to be a successful adventure, it is interesting to first have some information that is needed to make a great choice.

Initially, it is important that the investor be aware of his emotions.

We know how much our emotions can encourage decision making.

But what we cannot really forget is that they too can disrupt a conscious choice.

Do you know what to do to be able to identify the best investments?

Eyeing the market

One must understand that the stock market is variable. According to the book, knowing how to circumvent "Mr. Market" is primordial.

It turns out that you are often put to the test of what decision to make. You will be invited to sell and buy your shares at all times and it is up to you to analyze the best deal.

Understand that on some days bids will be made that are higher than the actual value and sometimes much lower bids will be generated. It is during this period that you must evaluate the profitability of buying and selling shares.

It takes wit to recognize and know how to pan the high-value companies being sold at a price below the deal.

That is the real bargain: the stock market.

The definition of parameters

The secret is simple: sell stocks when the price is up and buy when it is down.

How to do this? Well, it is necessary initially to follow two callsigns:

  1. Evaluate the earnings yield. This means that you need to analyze if the stock price is a good deal. This can be done by calculating between operating profit and the price of the company for which the analysis is being made;
  2. Evaluate the return on capital or ROC. Return on capital can be understood as one of the fundamentalist metrics that indicates a company's ability to generate profits.

Did you understand? Investment analysis is extremely important for an investor's excellent profitability.

Be sure of your decisions

We know that good choices need planning beforehand. You can't just shoot everywhere.

I know you want to be a good investor, hone your skills and add knowledge. Understand that for this you need to learn about safety margin.

To keep your investments from wandering around, you need to do a long-term study.

Throughout the work, the concept of safety margin is highlighted. It can be explained as the difference between government bond gains and the company's profit power.

But what is this power of profit?

Joel Greenblatt explains that in order to identify a company's profit power, a calculation is required that involves dividing its company's net profit and market value.

The safety margin is an incredible method for assessing the possible risks of the investment following some biases, among them:

  • High chances of profit or return on capital;
  • Decreased likelihood of loss.

What really matters is that you have enough wisdom to recruit low priced companies called by the bargain pricing author. It's simple: always be alert to the market, buy low-priced stocks and sell when they are valued. And how to do it? Now is the time for you to know the blessed magic formula.

The magic of wealth

We know that the main balcony refers to buying stocks of high-value companies that are being traded for low market value.

The Magic Formula, defended by the author Joel Greenblatt, is responsible for ranking these companies.

That's right. You should literally list the companies that will trigger the most profitability for you.

The Magic Formula is given through indicators of return on capital and profit ratio and market value.

But what are these indicators?

ROC shows how well a company can turn an investment into profit. It is obtained by dividing the operating profit, which comes only from the company's activity, by the amount invested.

In short, if you buy stocks with a high ROC, you will be doing a good business, as the purchase refers to overvalued stocks in the market view.

In this calculation, the return on profit is also taken into account. And for that, it is necessary to understand the concept of ROE and P/L.

To take a closer look, keep in mind that ROE is also a fundamentalist metric, a financial indicator for excellent investors and those looking to follow the path of success.

ROE stands for return on equity and refers to a company's net income related to equity. Accordingly, P/E is the price/earnings ratio and has the function of relating the share price to the net income of the share.

The book "The Little Book That Still Beats The Market" gives a very important tip: It is not wise to evaluate the indicators separately. Here is the need for you to know the other indicators and to understand intimately the sectors you are willing to invest in.

It is interesting to emphasize that the P/L ratio is the one that will indicate the time frame for a financial return to the shareholder.

The work cites the importance of the EBIT concept in shaping an investor. Understand that knowing about this type of profit ensures that you get pre-tax operating income analysis.

Thus, it allows a broader bias and brings greater chances of comparing the earnings of different companies, for example.

Learn that big returns are not a matter of luck but a matter of information and investment.

The primordial factor

It's no use knowing the subject, studying fundamentalist formulas, indicators, and metrics if you don't have emotional intelligence.

If you allow anxiety to take over your decisions, know that the outcome will not be satisfactory.

Investing requires study, but also a lot of patience and emotional control.

By following strategies, you have infinite possibilities of being a perfect investor. However, this does not mean that there is no chance of loss.

The stock market is a shaky field and studying it will make you better prepared for more coherent and wise decisions.

Greenblatt points out that this formula takes time. You have to put together an investment strategy and understand that the return of the magic formula requires patience. The longer the time spent studying and investing, the greater the chance of ultimate success.

Understand that making mistakes in the investment field is the same as adding experience and knowledge. You will be wiser with time and wit coupled with emotional intelligence will get you further.

Keep in mind that if you invest today, you will not reap the rewards right away. The author points out that between 1 and 3 years the Formula can yield values below the market average, which causes many investors to discourage or take silly and unnecessary attitudes.

Realize that this low is super normal.

So be solidified in what you really want. Aim at the top of the success that there is your place!

Plant patience and receive, in return, profits from the profits directly in your bank account.

Invest in it, we are rooting for you.

Books about money and investment

In "Unshakeable", Tony Robbins gives valuable advice: If you are not careful, taxes can easily eliminate 30% or more of your return on investment. It is therefore important to pay attention only to the net amount that you will actually be able to keep.

All the billionaires the author has met have one thing in common: They and their advisers are really smart about this tax issue.

For Jill Schlesinger, author of "The Dumb Things Smart People Do With Their Money", people should not invest their money in what they do not know. You must have good planning and a thorough knowledge of where to invest. Also, it is important that the investment makes sense for your life purpose in some way.

Finally, Daniel Goleman, author of "Emotional Intelligence", says strong emotions can interfere with attention and all aspects of clear thinking. Instead of trying to eliminate their feelings, people should strive to find a smart balance between reason and emotion.

So, how can I beat the market?

  • Study. Building a good investor requires knowledge. Investing is necessary, but studying is paramount;
  • Knowing the market and identifying the industry you want to invest in greatly increases the chances of success;
  • Learn that investing takes courage, but going deeper into what Magic Formula has to offer you is prudent;
  • Control yourself emotionally or you will not succeed. Have a strategy, but above all have patience;
  • Do not expect short-term profitable returns. The market needs time, and your experience;
  • Do not be afraid of losses. Be afraid of a lack of attempts. Dare, persevere and walk the path of success you have always dreamed of.

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