Magic Formula: four mistakes

Skectch notes on Greenbackd’s article: “How to beat the market: Joel Greenblatt’s List of Four Things Not To Do” of 10-May-2012.

Over 2 years, self-managed accounts in the MFI underperformed the S&P500. The S&P500 underperformend the professionally managed MFI. Here’s the 4 mistakes that the self-managed people did:

  1. avoided buying many of the biggest winners. The big winners had lots of bad news and uncertainty surrounding them, which self-managers failed to capitalise on
  2. they abandoned the strategy after a period of underperformance
  3. they abandoned the strategy when the market or their portfolios declined, even if it was outperfroming a declining market
  4. many bought after good periods of performance, which turns out to be self-defeating

About mcturra2000

Computer programmer living in Scotland.
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