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You're not smart enough and don't have enough time to beat the market



April 06, 2011 – Comments (12)

Let me begin by saying that I have always been a huge Joel Greenblatt fan.  His first book, You Can Be a Stock Market Genius literally changed the way I invest.  It is considered to be the unofficial instruction manual for special situations investing.  Greenblatt used its principles to deliver something like 50% annual returns at his hedge fund. 

As a big Greenblatt fan, I was really excited to read his new book The Big Secret for the Small Investor.  I was actually able to get an advance copy of it.

Unfortunately, as I had feared the book is more of an advertisement for his company, Formula Investing's, new funds than a groundbreaking new investing masterpiece like Stock Market Genius was.

I have to admit that given the fact that I have only had it for a couple of hours I have only had a chance to skim it, but the gist of it seems to be that most individual investors don't have the time or intelligence to invest successfully on their own, so they should allow the managers of certain ETFs and mutual funds, especially "value index" funds, to invest their money for them.

Here's one particular passage from the book that rubbed me the wrong way:

Then again, this is my third investing book. The first one, You Can Be a Stock Market Genius (yes I know, I know), was meant to help the individual investor, too. It didn't. It assumed that investors had a lot of specialized investment knowledge and a lot of free time. (Actually did end up helping a few dozen hedge fund managers, but...). My second book, The Little Book That Beats the Market, gave a step-by-step method for the individual investor to just "do it yourself.". I still believe strongly in this method and I still love the book. But here, too, I missed the boat. As it turns out, most people don't want to do it themselves. Yes, they want to understand it. But they still want someone else to do it for them.

So maybe the third time is the charm...

This statement struck me as somewhat condescending. The book basically seems like a rehash of what has already been said in The Little Book That Beats the Market with a plug for a website called valueweightedindex at the end.  That site isn't live yet, but I bet you a dollar that when it is it will direct people to Formula Investing's new mutual funds somehow.

If you were considering buying "The Big Secret" you would be better off saving the $20 and investing it in the great recommendations that are available here in CAPS and at The Motley Fool.

I reserve the right to change my mind after I have thoroughly read the book, but my initial impression of the book is that Greenblatt is basically saying you're not smart enough and don't have enough time to beat the market on your own.  Those of us here on CAPS who have consistently outperformed Mr. Market for years know that clearly is not the case.


12 Comments – Post Your Own

#1) On April 06, 2011 at 10:35 AM, mtf00l (46.67) wrote:

The "Big Secret" is if you want to make money, write a book about making money.

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#2) On April 06, 2011 at 10:44 AM, OneLegged (< 20) wrote:

"I was actually able to get an advance copy of it."


Could this be construed as insider trading?  :)

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#3) On April 06, 2011 at 11:11 AM, russiangambit (28.96) wrote:

Nethertheless ,except for those few people who live on investment boards and are loving it, it is very true that an average guy has no chance against teh smart money. An Average guy is doing OK now for the least 2 years but it is not them, the FED is doing it for them. Basically, FED oblitarated anybody with excess liquidity who dared to short/ sell stocks, no sellign is allowed anylonger in the US market. This is a receipe for another bubble. But for now things look OK.

When the bubble bursts an zaverage guy won't know what hit them AGAIN. They take everything that happens in the markets at the face value. They think shor selling is evil. Anybody who thinks that shouldn't be allowed to open an investment account, for their own good.

So, in the end what he says it true even though we don't like hearing it because it is so self-serving. Wall Street railroaded average peoples savings into stock markets via 401K for WS benefit and the Wall Street is reaping the rewards of it. This is a fact whether we like it or not. I always felt it is very wrong to have majority of people's pension money, money they can't afford to lose pushed into the stock market. Especially lately with the FED's low rate policies that hurt savers.

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#4) On April 06, 2011 at 11:16 AM, mtf00l (46.67) wrote:

Amen russian, amen

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#5) On April 06, 2011 at 11:40 AM, Enni1982 (56.36) wrote:

If you can't beat them, piggyback the hell outta em! 

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#6) On April 06, 2011 at 12:57 PM, portefeuille (98.37) wrote:

#5 Or follow the "fund" that beats those funds, hehe ...

fund trades.

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#7) On April 06, 2011 at 6:13 PM, EnigmaDude (51.80) wrote:

Although I can understand your take on it, I actually agree with his statement:

As it turns out, most people don't want to do it themselves.

To clarify, I don't think that most CAPS members who do outperform the market are representative of the "average investor".  The people like you and me who do take the time to read and research investments are not typical of "most" people who invest.

Of course, most people are not likely to buy his book either, so he is not doing himself any favors by making those statements and ticking off people like you who were hoping for better advice!

Thanks for the review - I will save my money for a better investment...

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#8) On April 06, 2011 at 6:34 PM, soycapital (< 20) wrote:

I third russians comment #3.

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#9) On April 06, 2011 at 8:46 PM, devoish (85.41) wrote:

Russian has it right.

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#10) On April 06, 2011 at 9:33 PM, walt373 (99.89) wrote:

Most investors know that most investors cannot beat the market. But it's still worth trying if you're serious about it. At the very least, you will learn a lot about the world. The people who have a shot at outperforming are the people most likely to know about Joel Greenblatt and his books, and it's a shame that he couldn't write something more useful...

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#11) On April 07, 2011 at 9:21 AM, dwot (29.73) wrote:

When I was looking into what I would do with investing I met with a financial advisor who told me he thought I would need a lot of help and advising.  His approach, he told me, would be banks and blue chips...

Over that next year I was encouraging all my friends to get out of their bank stocks before their crash.

That dork would have lost me about half my money and instead I tripled my money.

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#12) On April 07, 2011 at 4:31 PM, devoish (85.41) wrote:


You absolutely helped save me some money at that time. But there is no reason to believe that your friends would have been better off on their own, just better off with you as an investment advisor.

Even in this game, slippiing into the top 90% with 2000 points is player "wordtickers" who picked stock tickers that form words.

Best wishes,


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