Updated Magic Formula Results

Thu, Jul 23, 2009

At approximately 7 p.m. PST formulainvesting.com sent out an e-mail to its subscribers about updated magic formula results. Ever since the Little Book That Beat The Market was released in 2004 investors have anxiously been waiting to see the “official” updated results. The results are now available by going to the updated magic formula results.

Magic Formula Results Spoiler

No matter how you measure it, the magic formula continues to outperform the market. The updated magic formula results provide more proof that purchasing great companies at bargain prices works.

Magic Formula Results

Magic Formula Results During Financial Crisis

2008 is the year you want to pay attention to. Surprise , surprise! the magic formula outperformed during the financial crisis. A quick reminder though, a large part of the performance might be due to the magic formula excluding financial companies in the first place. Nevertheless, through June 30,2009, also known as the year after 2008, the magic formula has outperformed the S&P 500 by 16.4%. Another year you might want to pay attention to is 2006. That’s the only year after 2004 in which the magic formula underperformed. The magic formula returned 13.4%, while the S&P 500 returned 15.8%. This is also the year in which the material and energy sectors outperformed the market by a wide margin and it is possible the magic formula portfolio was not involved heavily in those two sectors.

What have we learned about the Magic Formula?

It works. There is no other way to put it. My biggest mistake was not being 100% committed to it from the start. Like many individuals, I was skeptical whether there truly is a “magic formula” to outperforming the market. Since then, I have crafted the magic formula investing system to meet my goals and the results have been better than expected. For those individuals still on the sidelines, give it a try. You can work around it to meet your specific needs.

Other Magic Formula Results

For over a year now, I set set up a site to see if the magic formula truly works. I call it my magic formula “experiment” and I test certain things out to see how it could be improved. For example, what if we simply purchase tecnology stocks? or how about stocks with market caps over 10 billion? These model portfolios are ran at marketocracy.com and my magic formula experiment site is located at http://www.magic-formula-investing.net/