If you're in a market-cap-weighted index, your stake in a company becomes larger when the stock price of that company goes up. Every time a stock is overpriced, the negative effect on your return is amplified because, not only is the price too high, but you own more of it. If a stock becomes underpriced, you own less of it. The more underpriced it is, the less of it you own.
Exactly. I do stock picking, concentrated, contrarian, long-term. But I usually recommend a equal-weighted index fund to people who don't wanna bother with research, don't have time or interest. $RSP for instance.
@@lorenzmuller3542 Equal weighted has really underperformed the S&P index though...last 5/10 years. Also, how often do you rebalance/buy/sell/exit your picked stocks? Seems like managing a hand picked selection of stock requires constant managing, being on top of all news/updates, exiting if there is a sudden bad news, tax mess....phew!
@@simrans3675 It should work out well with where the FANG valuations are at. I try to hold my positions as long as possible or sell once I see a better risk-reward elsewhere. I usually focus on small and micro cap cyclicals, so I try to hold them for a full cycle, maybe 5 years, sometimes longer. But the bad businesses you got to sell eventually. There is a ton of money to be made in energy services or mining for instance!
Read The little book thar beat the market, and will now buy the big secret for the small investor! Many thanks indeed for all you fascinating findings and work. Hi from Spain!
True. The part about market cap isn't necessarily true. For example his formula now recommends buying Apple as being in top 50 undervalued companies. :)
His funds are expensive, mgmt fees of around 1.35% per year. Not cheap and it eats up a large part of the advantage he supposedely thinks he providing through his system.
1:52 This is plowing the same field as if its new. This is what Peter Lynch wrote two books about around 20 years ago, Beating the Street and One up on Wall St., same idea.
Pure ignorance, two if the greatest best performing managers of all time with similar value sets are just frauds? Averaging 20%+ for over a decade made them rich. I know fund managers who hold Joel Greenblatt’s books higher than Benjamin Graham’s, so can’t really call them “children’s books.”
if hes such a great investor why is he not talking about businesses, and which businesses he likes. all he talks about is stocks and indices... "for the people" thats weird.
