The Little Book That Still Beats the Market: 8 key ideas
The core ideas of The Little Book That Still Beats the Market, each in under a minute, written in our own words. Want the full depth? Get the book.
- IDEA 1 OF 8
Simple ideas can beat complexity
Greenblatt sets out to explain investing simply enough for his children to understand.
He argues that a few clear principles can work better than complicated strategies. The style is friendly and simple.
- IDEA 2 OF 8
A gum business explains value
Greenblatt uses the story of a boy named Jason who sells gum at school to explain how businesses earn money.
The example shows why some businesses are worth more than others.
- IDEA 3 OF 8
Look for good businesses
Greenblatt describes return on capital as a measure of how well a business turns money invested into profits.
High returns suggest a strong, efficient business. Such businesses can grow without needing much new money.
- IDEA 4 OF 8
Look for cheap prices
Greenblatt describes earnings yield as a measure of how much a business earns compared with its price.
A high yield suggests the price may be a bargain. Low price alone is not enough.
- IDEA 5 OF 8
Combine quality and price
Greenblatt's magic formula ranks companies on both measures and favours those that score well on each.
He presents it as his method, based on his research results. Both measures matter together.
- IDEA 6 OF 8
Mr. Market creates chances
Greenblatt borrows Benjamin Graham's image of a moody Mr.
Market who offers prices that swing widely. These swings sometimes create opportunities for patient investors. Fear and greed drive these swings in price.
- IDEA 7 OF 8
The formula can disappoint for years
Greenblatt warns that his approach may underperform for long periods.
He argues that this is exactly why many people abandon it, and why it can keep working. Few people can endure that wait.
- IDEA 8 OF 8
Patience is the hardest part
Greenblatt stresses that sticking with a sensible approach during bad years is very difficult.
He presents discipline and patience as the real keys to his method. Most people quit too early.
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