The markets have corrected a lot over the past couple of weeks. And some of you may be considering jumping in to “buy the dip.” If a plain vanilla index ETF like the Nifty Bees is not your cup of tea, then you should consider “Magic formula investing” – an investment technique outlined by Joel Greenblat in his book “The Little Book that Beats the Market.” This technique beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%
The formula is based on a simple, combined ranking of Return on Capital (previous) and Earnings Yield (previous). You invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period. Re-balance the portfolio once a year, selling losers one week before the year-mark and winners one week after the year mark. Rinse-repeat.
We went one step further and setup a Theme that invests in NSE stocks that fit this criteria. Check out the “Magic Formula Investing” theme – a portfolio of 10, equally weighted stocks for the value investor in you.
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