📚The Little Book That Still Beats the Market — Joel Greenblatt

Hello everyone! Today, I'd like to take you on a deeper dive into a timeless classic in the investment world: "The Little Book That Still Beats the Market." This book is a 2010 revised edition by Joel Greenblatt , a follow-up to his 2005 book, "The Little Book That Beats the Market." Despite being a "little book," its simple and practical content has made it a "beginner's guide" for many investors.

🌟 Author background: Who is Joel Greenblatt?

• Investment legend : He is the founder of Gotham Capital. Between 1985 and 1994, the fund achieved an annualized return of over 40% , stunning Wall Street.
• Educational Contribution : As a professor at Columbia Business School, Greenblatt teaches students the essence of value investing in the simplest way.
• Writing style : Unlike serious financial books, his works are light-hearted and humorous, like telling a story, making difficult investment methods understandable to everyone.
• Features : His greatest strength is his ability to condense the art of value investing into a formula that anyone can master.

📖 The meaning of the title

The “Still” in the title of this revised edition is quite interesting. Greenblatt wants to tell you:
👉 No matter how much the market environment changes, in the long run, value investing and disciplined strategies can still beat the market .

🔑 Core content of the book (edited by the editor)

1. Magic Formula ✨

The core of this book is still the "Magic Formula Investing Method" , but Greenblatt further explains and optimizes it in the revised edition, making it easier for readers to understand and apply.

The core logic of the formula:

• Buy good companies : Select companies that can use capital efficiently and make profits continuously.
• Buy at Bargain Prices : Even good companies are worth investing in only when they are cheap.

Key indicators:

1. Return on Capital (ROC) : measures a company's profitability.
2. Earnings Yield : Similar to the "inverse price-to-earnings ratio", used to judge the cheapness.

→ Use the ranking method to sort stocks by ROC and earnings yield, and then select the top stocks to form an investment portfolio.

2. Features of the revised version🆕

• Simpler storytelling : Greenblatt uses more real-life examples in the new edition, and even uses the perspective of "teaching children to invest" to make complex formulas easier to understand.
• Emphasis on long-term holding : It is no longer just about "changing stocks once a year", but more emphasis is placed on the importance of discipline and patience.
• Clarifying investment myths : He spends more time explaining why the formula may not work in the short term, but will definitely work in the long term.

3. Why does the magic formula work? 🤔

• Market irrationality : In the short term, prices are often affected by emotions and news, and they deviate from their values.
• Disciplined investing : Formulas force you to avoid emotional actions.
• Value return : In the long run, good companies will eventually be recognized by the market, and their stock prices will return to reasonable or even overvalued levels.

4. Investment steps📝

1. The top 20–30 companies are selected based on a formula.
2. Buy in batches to spread the risk.
3. Review the portfolio annually and replace companies that are no longer included.
4. It will take at least 3-5 years of continuous operation for its effectiveness to show.

5. Investment mentality

• Short-term setbacks are normal : sometimes the market is irrational, and the formula may underperform the market for a year or two, but the long-term performance will return.
• Patience and discipline are the biggest challenges : most people lose not because of wrong formulas, but because they "give up halfway".
• Investing is a long-distance race : just like fitness, it takes time to see results.

💡 Editor's opinion: The value of this book

• A must-read for beginners : It explains the essence of value investing in the simplest language.
• The strategy is specific : Unlike some books that only talk about philosophy, here there are actual "how-to" strategies.
• Emphasize discipline : Remind us that the key to investment success is not finding a "secret weapon" but the ability to consistently execute a simple method.
• Suitable for everyone : Whether you are an investment novice or an old hand, you can get inspiration from it.

🌍 What the investment community thinks of this book

• Many people regard it as an "introductory textbook on value investing."
• Although the magic formula is simple, it has been verified many times and can indeed outperform the market in the long run.
• There are also criticisms that it is too mechanical and ignores industry analysis and qualitative research, but as a "basic framework", it is still very valuable.

📌 Editor's Summary

The Little Book That Still Beats the Market teaches us:
👉 Investing doesn’t actually require complex models; simple discipline can lead to success.
👉 Good company + good price + patience = long-term excess returns.
👉 The real challenge of investing is not “not finding a method” but “whether you can persist”.

My impression after reading this book is that it's like an investment manual, perfect for keeping on your shelf, flipping through it from time to time to remind yourself not to be carried away by market sentiment. Although it's a small book, the wisdom it contains is immense.