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Magic Formula Portfolio Update

By JLP | August 24, 2007

UPDATE: Just to give you an idea of how quickly this portfolio moves around, I refreshed my Excel spreadsheet and noticed that it is now up 6.51%. It was up 6.11% when I composed this post.

Well, since my last post on the Magic Formula Portfolio, it has been a rollercoaster ride. When I last reported on the formula on August 7, it was up 4% for the year. Since that time it actually went negative and now is now back up to a 6.11% gain for the year. This portfolio is not for the faint of heart and should only be used for a small portion of your investments – say 10% – 25%.

Here’s the portfolio arranged in order of performance:

The following graphic shows how each of the four purchases have performed. Remember, this is a hypothetical portfolio.

Even with the bounce back up to over 6% from a negative, we are still a long ways from the 26%+ return this portfolio registered earlier this year.

For more information, check out the following posts:

A Look at Magic Formula Investing

Magic Formula – Portfolio Update

Magic Formula Investing Update – 2nd “Purchase”

Magic Fomula Portfolio April Update

Magic Formula Portfolio May Update

Magic Formula Portfolio July Update

Topics: Investing, Magic Formula Portfolio | 5 Comments »

5 Responses to “Magic Formula Portfolio Update”

  1. MossySF Says:
    August 24th, 2007 at 12:18 pm

    My real MFI portfolio looks like so:

    April 1.4%
    May 7.5%
    June 4%
    July -8.2%
    August -5.3%

    -1.3% overall

    I look at this as a good sign. You can’t capture risk premium if there’s no risk.

  2. Kirk Kinder Says:
    August 24th, 2007 at 1:21 pm

    You need to be wary of anything that promotes a “magic formula.” It may make books sell better just like the secret sauce in a Big Mac does, but it really isn’t anything new.

    I would be interested to see how this portfolio performs relative to a traditional value index fund. This formula is merely another way to define value investments. I doubt it will top a mix of the Vanguard Value and Vanguard Small Cap Value ETF.

    Rather than Greenblatt’s book, I recommend taking a gander at John Bogle’s, “Little Book of Common Sense Investing.”

  3. Bobby Says:
    August 24th, 2007 at 1:24 pm

    JD, might be good to also include how an indexed mutual fund has done as a comparison.

  4. JLP Says:
    August 24th, 2007 at 1:31 pm

    Who’s JD? LOL! Just teasin’.

    Yes, I will do a comparison with various indexes at the end of the year.


    I’m not necessarily recommending this strategy. I wanted to follow it to see how it would perform. This is an expirement. Hopefully I have made that clear.

    I agree that the words “Magic Formula” are scary. However, the concept of buying undervalued stocks is sound.

  5. Finance Blog » Magic Formula Portfolio Update Says:
    October 7th, 2007 at 3:21 am

    […] Magic Formula Portfolio August Update Filled under: Finance | You can follow any responses to this entry through the RSS 2.0 feed. […]