Friday, May 15, 2009

A really little book that could help you beat the Market

I was visiting a friend a couple of weeks ago and we were having our usual discussions about investing and stock picking and he mentioned about a blog that rates the stocks in the Sensex and Nifty based on a ‘Magic formula’. Of course the words ‘Magic formula’ got me curious and who wouldn’t be? So I came back home and looked up this blog and found that this formula is actually from a book that the blogger had read in the past.

The title was “The Little Book That Beats the Market” and I almost screamed aloud “what the ****!!”

Don’t we already have countless number of books from third-rate writers or investors that claim to make you rich overnight and/or present you with strategies that let you earn supernormal returns? And I really thought that this blogger must be nuts to follow a shameless author who TOOTS his own horn so loud!

But then for some unknown reason I bothered to look at the author’s credentials.And, wow, weren’t they that bad! The author goes by the name of Joel Greenblatt and he is the founder and managing partner of Gotham Capital, a private investment partnership that has achieved 40% annualized returns since its inception in 1985. Having read this I asked myself does this guy really needs any cheap publicity or quick money?

Maybe not!

So I went ahead and picked up a copy of this book from the local library. And I have to admit that this was the simplest and the smallest investment book that I have read in the shortest time. The book has been deliberately kept free of financial jargons which I liked the most about this book and I could easily grasp the concepts. The concepts are not new, most of the value investors already use them in one way or the other, but the strategy keeps the whole process very simple which should keep emotions and attachments to particular stocks out the door.

I think this book should be most useful to the starters and not so financially savvy and I also tend to believe that this should work to give good returns if not the super normal returns promised by the author.

More information can be found at the following site



sumi said...

Book sounds interesting I like the theme around your blog since even I made some really dumb mistakes in my first month itself

A Day said...

Hey RK , I am currently reading the book and its quite intresting and easy to understand , can you mention the blog which rates Indian companies on this formula .