MMM-067: The Magic Question
Did MagicFormulaInvesting work? Early retirees answers to What do you do? How Free Markets work. Mark Hebner’s Step 6: Style Drift.
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Prompted by Nick’s email, I review the performance of Joel Greenblatt’s Magic Formula Investing stock picks from 15 December 2005 and compare it to the IndexFolio 100.
From the 83 surviving stocks, if one had invested $1000 in each, the total return would have been 12.3% from 15 Dec 2005 thru 20 June 2007. The IndexFolio 100 was up 38.12% from 1 Dec 2005 thru 31 May 2007.
Of the 10 stocks I selected as the ones to buy back then, $1000 in each would have gone up 40.3%. Seems like a lot of risk for very little extra return. The worst ten performing of the 83 have returned -37.5%. Ouch!
William writes to ask how he should start saving for retirement at age 37.
Our Tool helps William calculate his savings.
We take a look at Step 6: Style Drift. Do you really think someone can predict which category of stocks will do better? Why let them gamble with your money?
So, what do you do? I ask the early retirees how they answer this question.
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Hi Mark,
In the tools section of the podcast, you mentioned Dinkytown.net. You also said you didn’t know the history of Dinkytown. I thought I might know, living in Minneapolis, and sure enough, the website is hosted by KJE Computer Solutions, a Minneapolis based company. Dinkytown is the name of the area near the University of Minnesota where there are stores, bars, and restaurants that cater to the U of M students.
Keep up the great work!
Chris