Notes:
Active component and has to be different to beat the market. The best investment strategy is one you can stick with. Greenblatt's is one of the best performing active funds.
The Little Book That Beat The Market beat the market but people weren't disciplined. Buying high, selling low.
Shorts - speculative stocks in S&P500. High P/E
Long - value stocks that have been beaten down
Mitigates the volatility.
$1 in basket matching S&P500
90c/90c overlay long/short
Long stocks with low expectations - these won't fall much in down markets
Short stocks with high expectations - these have potential to be killed in down markets
People want protection when the market goes down.
This Index+ strategy has performed better than Greenblatt's long/short funds because the Index+ has more volatility as it follows the market more closely.
Can you handle 40% fall in stock market? Determines the strategy. The more risk you can handle the greater return long term.
Greenblatt is a professor at Columbia teaching Value Investing. Gets asked every year is the party over for new active investors? All the information out there. Passive outperforms Active. Greenblatt tells them people are still crazy and the market is still emotional.
Plenty of opportunities in individual stocks. Buy below the fair value.
Time horizon is shrinking. Patience has and is most important trait.
Disciplined investors will continue to win.
Managers have tough job dealing with emotions.
Dishonest people will continue to be dishonest people. Fraud will always be prevalent.
Best investment strategy is one you stick with.