Fórmula Joel

Educational content

Learn to Invest

Master Joel Greenblatt's investment strategy with our comprehensive educational content. Learn the theory, practice on the simulator, and build your portfolio with confidence.

Detailed articlesReal data~25 min total reading time
Joel Greenblatt's Magic Formula
Complete guide to the Magic Formula: who Joel Greenblatt is, how Earnings Yield and Return on Capital work, the ranking system, excluded stocks, historical performance (~30% p.a.), practical tips, and limitations.
Read article~15 min
How to Use the Platform
Step-by-step tutorial: create your free account, use the simulator, understand each filter and result metric, and explore all of our educational content.
View tutorial5 steps

Frequently Asked Questions

The most common questions about the Magic Formula answered directly.

1Does the Magic Formula really work?▾
In Greenblatt's backtests (1988–2004), the formula generated average annual returns of ~30.8% vs ~12.4% for the S&P 500. Independent studies in other markets found similar patterns. Past results don't guarantee future performance, and the strategy can underperform for 1–3 years. Those figures are from the book/author — not returns of this platform.
2Can I apply the Magic Formula to the Brazilian market?▾
Yes. The approach can be studied in any market with financial data. Fórmula Joel offers educational simulations for Brazil (B3) and the US (NYSE/NASDAQ). In Brazil, consider lower liquidity and sector concentration.
3Do I need money to use Fórmula Joel?▾
No. The simulator is free and open for studying historical data. Real investing is a separate decision — Greenblatt suggests diversifying across 20–30 stocks, which needs capital and involves real risk. This platform does not recommend buying or selling stocks.
4What's the difference between Earnings Yield and P/E ratio?▾
Earnings Yield (EBIT/EV) is more comprehensive than traditional P/E because: (1) it uses EBIT instead of net income, reducing tax and capital-structure distortions; (2) it uses Enterprise Value instead of price alone, considering interest-bearing debt and cash. That makes cross-company comparisons fairer.
5How often is the formula typically rebalanced?▾
Greenblatt describes annual rebalancing — refresh the ranking and rotate holdings. Too frequent rebalancing adds costs; too rare leaves the ranking stale. In the simulator you can study 3-, 6-, or 12-month intervals.
6Why are banks and utilities excluded?▾
Financials have different balance sheets — leverage is part of the business and distorts EBIT and EV. Utilities often have regulated profits, which makes the formula metrics less meaningful.
7Is the Magic Formula the same as value investing?▾
It is a specific, systematized form of value investing. Value investing is the broader philosophy of buying assets below intrinsic value (Graham, Buffett). Greenblatt’s formula combines two quantitative screens: cheap (EY) and good (ROC).

Educational tool

This is a study tool, not investment advice.

Fórmula Joel is independent and is not an official Joel Greenblatt or Magic Formula Investing product. It exists so you can learn and experiment with the Magic Formula methodology using historical data. Nothing here is financial advice, an offer, or a recommendation to buy or sell any asset. Past performance does not guarantee future results. Investment decisions are your own responsibility — consult a licensed professional.