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The Little Book That Still Beats The Market Summary

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After reading, “The Little Book That Still Beats the Market” by Joel Greenblatt I believe everyone is capable of learning how to make money for themselves after the advice given on the value of investing. Greenblatt communicates in a form of storytelling into a conversation as he discusses how if you truly trust something and believe on it then it will help you and it can work towards your advantage. In this case, it is believing that the famous magic formula truly works in order to help you make money. At first, Greenblatt helps us understand how to view the stock market. We must always think of the future because we always have to think ahead; when it comes to a business and investing we need to figure out what will the value of that company be during all of its upcoming lifetime. Once the value is determined it helps us analyze how the worth of the money is going to change from the present to the future. Knowing that value is what will help us make the decision whether to invest or not. Greenblatt provides an example by asking his son to decide whether or not he would invest in someone else gum business. The emphasis is figuring…show more content…
The magic formula is made up of two concepts to evaluate stocks, earning yield and return on capital. Using the magic formula requires you to pick the companies that have the highest earning yield and the highest return on capital. By using this formula you need to gather those numbers and rank by one being the highest and then move on to combining both rankings. But instead of just looking at the highest earning yield and highest return on capital what we have to observe in the rankings is which ones have the best combination of rankings in both categories. This way according to The little book that still beats the market; “this formula seeks to find good companies at bargain
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