published on Monday, January 2, 2006 in The Miami Herald
Even a Child Can Play the Market: Can But Can This Tiny Tome Really
Defeat The Street?
A book that can be read and understood by children may be the smartest stock guide you'll ever read.
The Little Book That Beats the Market. Joel Greenblatt. John Wiley & Sons. 176 pages.
I usually avoid investment books. They're dull and reading them is like listening to a long-winded lecture from your parents or math teacher, and who wants to listen to a load of boring advice about doing the things you already know you're supposed to do?
Not moi. The only investment book I actually enjoyed reading was The Only Investment Guide You'll Ever Need by Andrew Tobias. Now in its zillionth printing, the book is written in a light and pleasant style, and offers a wide range of common sense ideas and principles, making it appealing to financial dunderheads such as yours truly.
But Joel Greenblatt, a Columbia Business School professor, founder of an investment firm, and author of a favorite book among fund managers, You Can Be A Stock Market Genius, has written a new book that's created quite a buzz in the financial press. And its ideas and presentation are so simple, a child, or book reviewer, can easily comprehend them!
Here's his motivation: "This book was originally inspired by my desire to give each of my five children a gift. I figured if I could teach them how to make money for themselves, then I would be giving them a great gift -- truly one that would keep giving. I also figured that if I could explain how to make money in terms that even my kids could understand (the ones already in sixth and eighth grades, anyway), then I could pretty much teach anyone how to be a successful stock market investor. To help you along, I have included a magic formula. The formula is simple, it makes perfect sense, and with it, you can beat the market, the professionals, and the academics by a wide margin. And you can do it with low risk. The formula has worked for many years and will continue to work even after everyone knows it. Although the formula is easy to use and will not take much of your time, it will work for you only if you make the effort to fully understand why it works."
The forward (by the ubiquitous Andrew Tobias no less) is a nice introduction, but its implicit endorsement of Greenblatt's methods, their soundness and efficacy, is its most powerful message.
Magic formula aside, the basis of Greenblatt's method is similar to Warren Buffett's principles of value investing and requires both long-term commitment and discipline, which may be where the magic comes in. In the meantime, early notices for the book by Wall Street mavens have been near universal in their praise, so maybe Greenblatt does have something supernatural going for him.
At the very least, he offers novices and others seeking to make sense of the market a viable means to do so.
The website, www.magicformulainvesting.com, is a useful adjunct to the book, and is, at this point in time, free to use.
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