The Magic System was created by Joel Greenblatt and first described in his best-selling ebook The Little Guide That Beats the Market. Greenblatt claimed that this system achieved an annual return of 23.7 p.c over a 17-year interval from 1988 to 2004. The general market achieved a return of 12.3 p.c over the identical interval. Varied impartial backtesting research confirmed that the system beats the market within the US and internationally, although not essentially by the identical margin as offered by Greenblatt.
The Magic System makes use of the ideas of worth investing and combines the funding philosophies of Benjamin Graham and Warren Buffet. Primarily, this technique seeks to purchase good firms at discount costs.
The plain query you might have is how can the Magic System hold working when everybody is aware of about it? Greenblatt claimed that the system works nicely within the long-term, however within the short-term Mr. Market might value shares primarily based on emotion, thus the system can underperform the marketplace for a number of years in a row. Most traders simply can not follow the technique lengthy sufficient for it to work. This creates a fantastic alternative for traders with a long-term funding horizon. Due to this fact, this technique is most fitted for traders with persistence and a long-term view.
