Comments on: Magic Formula Portfolio Update

By: Finance Blog » Magic Formula Portfolio Update

Finance Blog » Magic Formula Portfolio Update — Sun, 07 Oct 2007 08:21:21 +0000

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By: JLP

JLP — Fri, 24 Aug 2007 18:31:17 +0000

Who’s JD? LOL! Just teasin’.

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

Kirk,

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.

By: Bobby

Bobby — Fri, 24 Aug 2007 18:24:36 +0000

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

By: Kirk Kinder

Kirk Kinder — Fri, 24 Aug 2007 18:21:26 +0000

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.”

By: MossySF

MossySF — Fri, 24 Aug 2007 17:18:43 +0000

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.