Magic Formula Investing
Definition
Magic formula investing is a term referring to an investment technique outlined by Joel Greenblatt that uses the principles of value investing.
Magic Formula Investing
What is 'Magic Formula Investing'
A money-making strategy that teaches investors a common-sense method for value investing in the stock market that is designed to beat the market's average annual returns. The Magic Formula strategy is described in the best-selling book "The Little Book That Beats The Market" (1980) by investor and Wharton graduate, Joel Greenblatt.
Explaining 'Magic Formula Investing'
Investors can use Greenblatt's online stock screener tool to select 20 to 30 top-ranked companies, based on their earnings yield and return on capital, in which to invest. These will all be large companies, and no financial companies, utility companies or non-U.S. companies will be included.
Investors sell the losing stocks before they have held them for one year to take advantage of the income tax provision that allows investors to use losses to offset their gains. They sell the winning stocks after the one-year mark, in order to take advantage of reduced income tax rates on long-term capital gains. Then they start the process all over again.
Magic Formula Investing FAQ
Does the magic formula investing work?
Is Magic Formula Investing free?
What is Greenblatt's magic formula?
How do you calculate magic formula?
What does magic formula mean?
Further Reading
clutejournals.com [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …
lup.lub.lu.se [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …
lup.lub.lu.se [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …
wiredspace.wits.ac.za [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …
www.emerald.com [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …
open.uct.ac.za [PDF]
… However, the basic principle underpinning the variants of value investing remain unchanged: stocks should be bought at a price lower … While beating the market may be sufficient for some, others might question whether the magic formulas are useful to a value … Magic Formula vs …