From bestselling author, investment expert, and Wall Street theoretician Jack Schwager comes a behind-the-scenes look at the world of hedge funds, from 15 traders who’ve consistently beaten the markets. Exploring what makes a great trader a great trader, Hedge Fund Market Wizards breaks new ground, giving readers rare insight into the trading philosophy and successful methods employed by some of the most profitable individuals in the hedge fund business.
Chapter 15 is dedicated to Joel Greenblatt an American academic, hedge fund manager, investor, and writer who shares three biggest mistakes investors make. Joel Greenblatt published The Little Book That Still Beats the Market and runs Magic formula investing website that was built to give everyone the ability to use a free and simple stock screening tool to select Magic Formula stocks, as described in Joel Greenblatt’s book The Little Book That Beats the Market.
Three biggest mistakes investors make
- First, succumbing to emotions. They tend to make investment decisions based on an emotional response to price action or what they read in the papers or hear on the news.
- Second, investing without knowledge. If you can’t value a company, you have no basis on which to invest. Valuing a company is pretty hard, and probably no more than 1 percent or 2 percent of investors have the ability to properly value companies. You can’t buy companies for a lot less than they are worth unless you can figure out what they are worth in the first place.
- Third, placing too much weight on the recent past performance of managers.