Comments on: The Magic Formula Suffered a Huge Blow to the Gut! http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 11 Feb 2012 20:32:19 +0000 hourly 1 http://wordpress.org/?v= By: Free Money Finance http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-128261 Free Money Finance Fri, 10 Aug 2007 10:19:24 +0000 http://allfinancialmatters.com/?p=1934#comment-128261 <strong>Star Money Articles for the Week of August 6</strong> Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Consumerism Commentary discusses accepting a counter-offer. AllFinancialMatters notes that the magic formula isn't so magical. MightyBargainHunter gives another good reason t... Star Money Articles for the Week of August 6

Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Consumerism Commentary discusses accepting a counter-offer. AllFinancialMatters notes that the magic formula isn’t so magical. MightyBargainHunter gives another good reason t…

]]> By: JLP http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127642 JLP Wed, 08 Aug 2007 17:55:26 +0000 http://allfinancialmatters.com/?p=1934#comment-127642 Andy, One other thing, I just checked the performance of the iShares S&P SmallCap 600 ETF (IJS). Through June 29, it had returned 6.36% while the Magic Formula was up 21.13%. Andy,

One other thing, I just checked the performance of the iShares S&P SmallCap 600 ETF (IJS). Through June 29, it had returned 6.36% while the Magic Formula was up 21.13%.

]]> By: JLP http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127635 JLP Wed, 08 Aug 2007 17:46:02 +0000 http://allfinancialmatters.com/?p=1934#comment-127635 Andy, I think over the long run the strategy will work just fine. I was just surprised at how fast it fell. Andy,

I think over the long run the strategy will work just fine. I was just surprised at how fast it fell.

]]> By: Brad http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127607 Brad Wed, 08 Aug 2007 15:44:24 +0000 http://allfinancialmatters.com/?p=1934#comment-127607 Jon-- For many investors, removing the human element (freak out during a down turn, buy buy buy when everyone feels great) would be a very good thing! :-) Jon–

For many investors, removing the human element (freak out during a down turn, buy buy buy when everyone feels great) would be a very good thing! :-)

]]> By: Andy http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127487 Andy Wed, 08 Aug 2007 06:39:06 +0000 http://allfinancialmatters.com/?p=1934#comment-127487 I don't see how this is any better than buying a small cap value index fund. You are certainly getting more volatility and almost certainly aren't getting any better returns. I don’t see how this is any better than buying a small cap value index fund. You are certainly getting more volatility and almost certainly aren’t getting any better returns.

]]> By: Jon http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127476 Jon Wed, 08 Aug 2007 05:02:29 +0000 http://allfinancialmatters.com/?p=1934#comment-127476 I read the book "Little Book that Beats the Market" and tried the investments, but my concern is that it removes the "human" decision about a stock... Is it a good investment or not, that a decision to make about the product or service, the market, and the management. It falls short of Warren Buffett's investing strategies. v/r Jon <a>Make Money Jot</a> I read the book “Little Book that Beats the Market” and tried the investments, but my concern is that it removes the “human” decision about a stock… Is it a good investment or not, that a decision to make about the product or service, the market, and the management. It falls short of Warren Buffett’s investing strategies.

v/r
Jon
Make Money Jot

]]> By: JLP http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127461 JLP Wed, 08 Aug 2007 04:14:27 +0000 http://allfinancialmatters.com/?p=1934#comment-127461 Esmo and Driac, Of course I know this. I guess I didn't address it in the post. Esmo and Driac,

Of course I know this. I guess I didn’t address it in the post.

]]> By: Driac http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127458 Driac Wed, 08 Aug 2007 04:01:53 +0000 http://allfinancialmatters.com/?p=1934#comment-127458 Esmo has it right. For you to extrapolate anything from 6 months of behavior in the market is premature. You need to evaluate stock performance over 5, 10, 15 years. Give it some time, and stop watching to see the pot boil. It'll get there on its own. Esmo has it right. For you to extrapolate anything from 6 months of behavior in the market is premature. You need to evaluate stock performance over 5, 10, 15 years. Give it some time, and stop watching to see the pot boil. It’ll get there on its own.

]]> By: Esmo http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127370 Esmo Tue, 07 Aug 2007 21:52:45 +0000 http://allfinancialmatters.com/?p=1934#comment-127370 You can see the initial prices on Yahoo Finance Historical Prices and create a spreadsheet that way. A year's performance is really not evident of this strategy though - I'd take at least 5 years or 10 years in up, down, and up/down periods to really measure this strategy's effectiveness. You also want to measure against other investment strategies to look at the Magic Formula's effectiveness - I'm sure a lot of funds lost a lot of money in the past couple weeks (and for 2 of Bear Sterns' hedge funds, a little more than a lot). It's really hard to measure the effectiveness of a strategy, so you might as well buy index funds and focus on asset allocation. You can see the initial prices on Yahoo Finance Historical Prices and create a spreadsheet that way. A year’s performance is really not evident of this strategy though – I’d take at least 5 years or 10 years in up, down, and up/down periods to really measure this strategy’s effectiveness.

You also want to measure against other investment strategies to look at the Magic Formula’s effectiveness – I’m sure a lot of funds lost a lot of money in the past couple weeks (and for 2 of Bear Sterns’ hedge funds, a little more than a lot).

It’s really hard to measure the effectiveness of a strategy, so you might as well buy index funds and focus on asset allocation.

]]> By: Don http://allfinancialmatters.com/2007/08/07/the-magic-formula-suffered-a-huge-blow-to-the-gut/comment-page-1/#comment-127367 Don Tue, 07 Aug 2007 21:46:08 +0000 http://allfinancialmatters.com/?p=1934#comment-127367 Even in the book they point out that there will be long stretches when the magic formula under-performs. No surprise there. Even in the book they point out that there will be long stretches when the magic formula under-performs. No surprise there.

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