Wisdom, Wealth, and Wellness Joel Greenblatt — Beyond the Index: Emotions, Behavior, and Investing Success
Nov 14, 2023
Joel Greenblatt, investor and author behind Gotham Capital and The Little Book That Beats the Market, shares his approach to picking undervalued businesses. He discusses why investors fail to stick to strategies, the role of behavioral remedies and margin of safety, the active vs indexing trade-offs, and how size and systematic long/short moves reshape investing.
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Investor Behavior Can Destroy Fund Returns
- Dollar-weighted investor returns often trail fund returns because investors chase past performance and buy high, sell low.
- Behavioral flows can turn an 18% annualized return into an investor-level loss.
Buy More When Your Conviction Persists
- When a favored holding drops, consider adding if your analysis still holds and the price is lower.
- Treat price declines as buying opportunities only when you remain confident in the business thesis.
Learn Valuation And Use Margin Of Safety
- Know how to value businesses before buying individual stocks; otherwise avoid single-stock investing.
- Use a meaningful margin of safety to reduce downside when you're sometimes wrong.
