Fórmula Joel

The Little Book That Beats the Market

Joel Greenblatt

International bestseller

The Little Book That Still Beats the Market

Joel Greenblatt

Published 2005 (updated 2010)~180 pages

About the Book

"The Little Book That Beats the Market" introduces the Magic Formula, an investment strategy that Greenblatt developed and extensively tested. The book is written accessibly — Greenblatt originally wrote it so his teenage children could understand — but the concepts are powerful enough for professional investors.

The book guides the reader through the logic of value investing, explains the two key metrics (Earnings Yield and Return on Capital), demonstrates the formula's impressive historical performance, and provides clear instructions on how to apply it. The updated 2010 edition includes additional data and reflections on the formula's performance during the 2008 financial crisis.

Key Takeaways

  • Buying good companies (high Return on Capital) at cheap prices (high Earnings Yield) is the key to superior long-term returns.
  • The Magic Formula consistently outperformed the S&P 500 for 17 years in backtesting, with average annual returns of ~30.8%.
  • The strategy is mechanical and disciplined — it eliminates the emotions that cause most investors to lose money.
  • The formula doesn't work every year. Patience and discipline are required to maintain the strategy during underperformance periods.
  • The market frequently misprices stocks in the short term, creating opportunities for patient investors.
  • Anyone can apply the formula — it doesn't require advanced financial knowledge or access to expensive tools.

Who Should Read This Book?

  • Beginner investors who want a proven and easy-to-follow strategy
  • Experienced investors seeking a quantitative and disciplined approach
  • People interested in value investing but intimidated by the complexity
  • Managers and analysts who want to understand one of history's most successful strategies
  • Anyone who wants to learn to think about investing rationally
Book Quote
"If you buy good companies at bargain prices, in the long run, you will be rewarded."

— Joel Greenblatt

"The magic formula works. It works if you buy the individual stocks on your own. It works if you use our website. It works in up markets and down markets. It works for large-cap and small-cap stocks."

— Joel Greenblatt

Other Books by Joel Greenblatt

If you enjoyed "The Little Book That Beats the Market," explore other titles by Greenblatt:

You Can Be a Stock Market Genius

1997

Advanced investment strategies in special situations: spin-offs, restructurings, mergers, and arbitrage. For investors who want to go beyond the basics.

The Big Secret for the Small Investor

2011

How individual investors can outperform professionals using a value-weighted indexing approach. An evolution of the Magic Formula ideas.

Common Sense: The Investor's Guide to Equality, Opportunity, and Growth

2020

Greenblatt expands his focus to social issues, arguing how free markets and education can create more equitable opportunities.

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