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The Little Book That Beats the Market

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Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will. In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He prov Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will. In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.


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Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will. In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He prov Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will. In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 40% for over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.

30 review for The Little Book That Beats the Market

  1. 5 out of 5

    Marko

    This is a book where the writer tries to sell in a concept in a funny and easy way. But it isn't funny and he seems to think that the reader is stupid. The method of picking stocks might work, but the writer could have explained it in one page instead. He doesn't need to sell in the method on 95% of the pages of the book. This is a book where the writer tries to sell in a concept in a funny and easy way. But it isn't funny and he seems to think that the reader is stupid. The method of picking stocks might work, but the writer could have explained it in one page instead. He doesn't need to sell in the method on 95% of the pages of the book.

  2. 4 out of 5

    Jon

    This is just fantastic. In his little book which is part of a larger series on investing, Greenblatt humourously ivites us to a time tested fairly simple investing strategy called the "Magic Formula". http://www.magicformulainvesting.com/ In essence it is value investing by looking at the earning yield (not dividend yield!)and the return on assets (ROA). I find Greenblatt to be a fantastic and amusing mentor that describes finance in a very simple and thorough manner. The introduction should be ob This is just fantastic. In his little book which is part of a larger series on investing, Greenblatt humourously ivites us to a time tested fairly simple investing strategy called the "Magic Formula". http://www.magicformulainvesting.com/ In essence it is value investing by looking at the earning yield (not dividend yield!)and the return on assets (ROA). I find Greenblatt to be a fantastic and amusing mentor that describes finance in a very simple and thorough manner. The introduction should be obligatory reading for all investors to put them in the right mindset. While not new (Buffett, Graham), his light and easy-going way of describing what a business is and how to think about it, is stellar. While the method may not be for everyone, it is certainly a good starting point for everyone and there are some pretty bad investing books out there detrimental to the health of your wallet. This is not one of them.

  3. 4 out of 5

    ScienceOfSuccess

    Quite interesting, written as simple as possible, not sure how good the formula would be tho.

  4. 4 out of 5

    Erik Blanco

    As a person with a degree in Finance, working in the industry, and with an advanced financial certification, this book was useful to oversimplify concepts of picking individual stocks. It's a good read and would recommend to all ages. Wish I would've read it sooner rather than later. As a person with a degree in Finance, working in the industry, and with an advanced financial certification, this book was useful to oversimplify concepts of picking individual stocks. It's a good read and would recommend to all ages. Wish I would've read it sooner rather than later.

  5. 5 out of 5

    Matt

    Being interested in finance at an early age is pretty difficult for me because of all of the complex terminology and concepts. My brother, who is in finance, suggested this for me because it is easy to understand. He was completely right, Greenblat was able to explain market analysis so well a 10 year old could go out tomorrow and be able to choose stocks well. He used interesting metaphors with his kids and their candy business as if they were a multi-million dollar company. After reading this Being interested in finance at an early age is pretty difficult for me because of all of the complex terminology and concepts. My brother, who is in finance, suggested this for me because it is easy to understand. He was completely right, Greenblat was able to explain market analysis so well a 10 year old could go out tomorrow and be able to choose stocks well. He used interesting metaphors with his kids and their candy business as if they were a multi-million dollar company. After reading this book I feel I can finally now understand what my brother and my dad are talking about at the dinner table. It is amazing that Greenblat was capable of explaining something that people get paid millions of dollars to do, to a 15 year old. I would recommend this to anyone interested in finance.

  6. 4 out of 5

    Saugat Banerjee

    The advice given in the book about the 'magic formula' sounds good and the author backs it up with past 17 years of results. Its about picking 20-30 stocks with high Return on Capital and available in bargain prices. Its a quite unique way of investing as you need to keep selling the stocks around one year mark and then buy new ones with the magic formula. His website is free to find the stocks out using the 'magic formula'. But, its like a process which needs time and patience (and ofcourse mon The advice given in the book about the 'magic formula' sounds good and the author backs it up with past 17 years of results. Its about picking 20-30 stocks with high Return on Capital and available in bargain prices. Its a quite unique way of investing as you need to keep selling the stocks around one year mark and then buy new ones with the magic formula. His website is free to find the stocks out using the 'magic formula'. But, its like a process which needs time and patience (and ofcourse money) and needs constant (atleast once in a few months to buy/sell stocks) monitoring. The book is an easy read with nice examples to press forth the fundamentals of investing in general.

  7. 4 out of 5

    Ajinkya Jadhav

    Decent read. Beats a bit around the bush when it really has only few concepts (very solid ones though) to offer. Would be a better read for someone in early 20s just starting out their investing journey.

  8. 5 out of 5

    Kenneth

    Good but essentially a value investing white paper stretched to book-length.

  9. 5 out of 5

    Thomas Edmund

    It's actually quite hard to rate and review this litte book - its fairly sagely and useful advice, presented in a fairly funny and easy to digest manner. I guess the challenge is that it kind of sits between levels of knowledge - I wouldn't necessarily recommend to a complete beginner, but then I think if someone had already dived into more technical stuff it may be a little less useful. Given that its a short thesis I wouldn't necessarily worry about picking it up and finding it only so helfpul It's actually quite hard to rate and review this litte book - its fairly sagely and useful advice, presented in a fairly funny and easy to digest manner. I guess the challenge is that it kind of sits between levels of knowledge - I wouldn't necessarily recommend to a complete beginner, but then I think if someone had already dived into more technical stuff it may be a little less useful. Given that its a short thesis I wouldn't necessarily worry about picking it up and finding it only so helfpul but equally I wouldn't be throwing it on the must-read pile. Actually I have one group that its probably the best for - perhaps people who have a lot of experience in investing but perhaps are struggling or having difficulty deciphering some of the more in depth parts of investing this book is a good bridge!

  10. 5 out of 5

    Carmen Bartley

    Even if you aren't (yet!) an investor trying to beat the market, this is a great book to learn the basics of stock market investing in as simple language as possible. I've seen it mentioned in other books/articles as I've tried to educate myself in this area. It is a short, quick read. Even if you aren't (yet!) an investor trying to beat the market, this is a great book to learn the basics of stock market investing in as simple language as possible. I've seen it mentioned in other books/articles as I've tried to educate myself in this area. It is a short, quick read.

  11. 5 out of 5

    Merdan Tekayev

    Great book about investing supported by facts(didn't check it myself though).It concentrates on the two main factors of businesses( earning yield and return on capital) which could be an accurate indicators of its success or failure. Author illustrates what could be the best number of stocks in ones portfolio, gives step-by-step guidance and so on! Overall "straight-to-the-point" kind of book! Great book about investing supported by facts(didn't check it myself though).It concentrates on the two main factors of businesses( earning yield and return on capital) which could be an accurate indicators of its success or failure. Author illustrates what could be the best number of stocks in ones portfolio, gives step-by-step guidance and so on! Overall "straight-to-the-point" kind of book!

  12. 5 out of 5

    Todd Wood

    While a very simple and straightforward book, the concepts are actually very powerful and important. It is written in a way to be accessible to non-finance people, and offers a good explanation as to why certain companies outperform others. Most simplistically, you want to buy companies with above average earnings growth for below average prices... duh. But a nice reminder, and probably would be a good read for the average person. I knocked a star off due to the fact that calling this the "magic While a very simple and straightforward book, the concepts are actually very powerful and important. It is written in a way to be accessible to non-finance people, and offers a good explanation as to why certain companies outperform others. Most simplistically, you want to buy companies with above average earnings growth for below average prices... duh. But a nice reminder, and probably would be a good read for the average person. I knocked a star off due to the fact that calling this the "magic formula" is pretty corny, and the constant reference to the "magic formula" was a bit annoying.

  13. 5 out of 5

    Pulkit Goel

    This is a great book to get the most basic concept in investing straightened out. Being not from a finance background, as most people are, the investment jargon gets too heavy on a person who has a slight intersest in it, leave alone the art which is being played behind the scene. This book provides these basic concepts in a very elegant way. However, this book has heavily stressed out the use of 'magic formula' throughout, which might not present the complete picture to the reader. Thus, advisab This is a great book to get the most basic concept in investing straightened out. Being not from a finance background, as most people are, the investment jargon gets too heavy on a person who has a slight intersest in it, leave alone the art which is being played behind the scene. This book provides these basic concepts in a very elegant way. However, this book has heavily stressed out the use of 'magic formula' throughout, which might not present the complete picture to the reader. Thus, advisable to supplement the knowledge with further read.

  14. 4 out of 5

    Soon Mi

    Of course his magic formula works retrospectively, every shot is a bulls eye if you draw the circles after you shoot... the book is pretty easy to read, which I appreciate as someone who’s still in the beginning stages of learning about the stock market. However, I feel dubious about the content and feel like he’s just a salesman. I’ll have to do some more personal research.

  15. 4 out of 5

    Victor

    The second to last chapter made me giggle: knowing exactly what EBIT, EV and tangible capital employed are the Devil hiding in the details and it's strange not seeing them mentioned in the comments. It means that they were either ignored or the readers kept them for themselves. I hope for the latter. A criticism I have is that the tangible capital employed is a less intuitive way of looking into Return of Invested Capital and that financial firms are excluded for Greenblatt's calculations and tha The second to last chapter made me giggle: knowing exactly what EBIT, EV and tangible capital employed are the Devil hiding in the details and it's strange not seeing them mentioned in the comments. It means that they were either ignored or the readers kept them for themselves. I hope for the latter. A criticism I have is that the tangible capital employed is a less intuitive way of looking into Return of Invested Capital and that financial firms are excluded for Greenblatt's calculations and that's a pity. Far from me to disagree with a professor in finances but I think financial firms use debt itself as a working capital meaning that it's interest payment shows up in the EBIT rather than in financing costs, transforming it into something like "EBT" and modifying EV to include only the equity portion with the ROIC remaining unchanged. But I'd love to be contradicted.

  16. 4 out of 5

    J. Sebastian

    This was a good book for me to read because it describes an important method for the valuation of companies and for making smart investments; this is usually a difficult subject that fills people with anxiety or puts them to sleep, but Greenblatt has written in a light and easy manner, with generous humour, and in such simple language that it removes anxiety, encourages the reader, and gets him excited to learn more, pick the right stocks, and give it a start. The book is easy to follow and unde This was a good book for me to read because it describes an important method for the valuation of companies and for making smart investments; this is usually a difficult subject that fills people with anxiety or puts them to sleep, but Greenblatt has written in a light and easy manner, with generous humour, and in such simple language that it removes anxiety, encourages the reader, and gets him excited to learn more, pick the right stocks, and give it a start. The book is easy to follow and understand even for those with no financial understanding to begin with. Greenblatt's secret is to buy good companies at bargain prices. His formula explains how to locate undervalued stocks, and to hold these until the market gives them a fair value. Of course, there can be no guarantees when investing in stocks, and he gives you a fair warning, but the system should work. :-)

  17. 4 out of 5

    Novylia Saputro

    I like how each sentence just flows naturally (with a bit of interesting back-story), rather than being a heavy investing guidance book. I know some people might feel that Greenblatt has prolonged the book than it should be, but I think that is because he would like the reader to fully comprehend the concept behind his so-called 'magic formula' to conquer the market. I also believe this book is one of the simplest and easiest to understand for fundamental related investment books than most out t I like how each sentence just flows naturally (with a bit of interesting back-story), rather than being a heavy investing guidance book. I know some people might feel that Greenblatt has prolonged the book than it should be, but I think that is because he would like the reader to fully comprehend the concept behind his so-called 'magic formula' to conquer the market. I also believe this book is one of the simplest and easiest to understand for fundamental related investment books than most out there, not to mention with only 100+ pages that could be finished in one day. I have no intention to give out spoilers on his method, but I think his method is viable and reasonable to be applied.

  18. 5 out of 5

    Miguel Abreu

    A book for investors which helps to select good companies and a discount price in the market, gives also how investors should look for companies and compare them to make the right decision. In the end you need to do your homework and decide for yourself your own path of investment.

  19. 4 out of 5

    Pyry Takala

    The book suggests a simple strategy to beat the market. Sounds good? Except that: 1) The formula could be summarised in 1 page, and 2) The formula doesnt beat the market https://blog.portfolio123.com/does-jo... The book suggests a simple strategy to beat the market. Sounds good? Except that: 1) The formula could be summarised in 1 page, and 2) The formula doesnt beat the market https://blog.portfolio123.com/does-jo...

  20. 4 out of 5

    Shubham Garg

    Do not miss the appendix section. If you want just mathematical and practical calculations without the theory that explains it, skip to the appendix directly. Overall a fun read (never thought that fundamentals in investing can be introduced in such a hilarious way).

  21. 5 out of 5

    Eileen reisin

    Fucking tiptop. A 12-year-old could get this read and understood over a Sunday afternoon. Would recommend.

  22. 4 out of 5

    Gowtham Injamuri

    Amazing narrative of a framework for investing. Very detailed in a manner that can be understood by teenagers. This reminded me that I could've read this at least 6 years ago😂😂 Amazing narrative of a framework for investing. Very detailed in a manner that can be understood by teenagers. This reminded me that I could've read this at least 6 years ago😂😂

  23. 4 out of 5

    Abhinav

    Meant for people who really want to automate all of their investments. Some of these companies have an irreversible path to destruction that can destroy a portfolio, but some stocks in the formula can net 40 percent returns. The main goal is to diversify your portfolio so one company can't destroy it Meant for people who really want to automate all of their investments. Some of these companies have an irreversible path to destruction that can destroy a portfolio, but some stocks in the formula can net 40 percent returns. The main goal is to diversify your portfolio so one company can't destroy it

  24. 5 out of 5

    Sandeep

    Love the way things are explained. Even if you are not looking to do any investment this book is fun to read.

  25. 5 out of 5

    Anuk Yingrotetarakul

    This book provides a good overview of some core value investing principles. The magic formula, a simple tool for filtering stocks based on earnings yield and return on capital, is a good starting point for selecting stocks. However, for readers who crave a deeper understanding and richer perspective on value investing may be left disapppointed by the lack of depth.

  26. 4 out of 5

    Manas Saloi

    Really good investing framework for beginners but could have been a blog post.

  27. 4 out of 5

    Tungstenmouse

    This book is small but still could have been half as long. The author has good information but talks way too much about other stuff.

  28. 4 out of 5

    Gabriel Mahl

    Fantastic book!

  29. 4 out of 5

    Antonio

    Before and after reading this book, I read a lot of reviews, both praising and hating it, but all with the same point in common: simplicity. Because say one thing about this book, say it is easy to comprehend. But therein lies its greatness. Detractors critizicing it seem to have missed the point or have read it with a different objective. It is not an insightful recipe for wannabe investing gurus, but rather an humorous, humble and simple approach to investing with common sense, both things most Before and after reading this book, I read a lot of reviews, both praising and hating it, but all with the same point in common: simplicity. Because say one thing about this book, say it is easy to comprehend. But therein lies its greatness. Detractors critizicing it seem to have missed the point or have read it with a different objective. It is not an insightful recipe for wannabe investing gurus, but rather an humorous, humble and simple approach to investing with common sense, both things most humans are reluctant to learn. So yes, I love this book, and I am sure that everybody who comes looking for basic understanding of investing will do the same. Whether you come to apply its magic formula or not is entirely up to you, but at least it will have provided you with the first stepping stone from which to start making sound investments.

  30. 5 out of 5

    Santosh Patil

    If you are a beginner in the market and need something to start with which is effective as well as easy to understand, pick this book. Whole 'little' book revolves around 'Magic Formula' which tells people to invest in stocks with high earning yield and high return on capital. Four stars for the book and one more for simplicity and humor with which it is presented. If you are a beginner in the market and need something to start with which is effective as well as easy to understand, pick this book. Whole 'little' book revolves around 'Magic Formula' which tells people to invest in stocks with high earning yield and high return on capital. Four stars for the book and one more for simplicity and humor with which it is presented.

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