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Kalen Bruce is passionate about helping you master your finances and maximize your productivity. He defies millennial laws by having no debt and 4 children. Get his free book, Financial Freedom on a Full ... more

The 2 Main Ideas From “The Little Book That Beats The Market”

Date: Monday, February 20, 2017 1:33 PM EDT

Read Time: 5 minutes


The Little Book That Beats the Market is a classic book on investing in the stock market.

Author Joel Greenblatt gives an innovative method for choosing stocks.

It’s pretty impressive, honestly.

Here are his main ideas, and the “magical formula” he uses.

He actually refers to it as “the magic formula,” and it just may be.

Main Idea #1: Invest in Index Funds, If You Don’t Want to Put in the Work

I’ve said this beforeWarren Buffett has has this before. So it’s nothing new. I’m not saying that Buffett and I are on the same playing field, I’m saying that I’ve said it before and an authority in the world of investing has said it before — two different perspectives indeed.

Let’s be honest, you really have two reasonable options when it comes to investing in the stock market:

  1. Spend a lot of time finding individual stocks.
  2. Invest in index funds if you don’t have the time for option one.

That pretty much sums it up. I mean, there are other options, but those are the two that make the most sense. Index funds have much lower fees than active mutual funds, and passive funds almost always beat active funds over the long haul, because around 80% of mutual fund managers don’t beat the market. The fact is, almost no mutual fund manager can beat the market, so why not invest in the market itself?

That’s exactly what an index fund does. An index fund is investing in the market.

Feel free to go read about it and see for yourself, but you’ll find it to be true. Index funds just make more sense than actively managed funds — over 80% of the time. So if you don’t want to put the time in to pick stocks (which takes a lot of time), invest in index funds.

You can open an IRA with TD-Ameritrade in less than 15 minutes and start investing in index funds right now.

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