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Journal : ARISTO

Decoding the Magic Formula: Navigating the Complex World of Stock Trading Wicaksono, Soetam Rizky; Setiawan, Rudy
ARISTO Vol 12 No 1 (2024): Januari
Publisher : Universitas Muhammadiyah Ponorogo

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.24269/ars.v12i1.7490

Abstract

Stock trading is complicated and risky. Investors' conditions, aspirations, and viewpoints shape their journeys. This article examines stock trading and investing, focusing on Joel Greenblatt's "The Little Book That Beats the Market" and "Magic Formula" investment technique. Greenblatt's book argues that stock trading is better than saving. The "Magic Formula" focuses on return on capital and earnings yield and is simple but effective. The Magic Formula helps investors find cheap, high-quality firms by evaluating them by these two ratios. The Magic Formula, like every investment approach, has limitations. Its success depends on the investor's goals, risk tolerance, and situation. The Magic Formula works for some investors but not others. This emphasizes the need of personalizing one's financial approach and knowing that one size does not fit all. Greenblatt also stresses the significance of knowing and believing in the Magic Formula, even when it seems to be failing. He believes that effective investing requires both picking the correct companies and sticking to your strategy, even when it's hard. This emphasizes the significance of patience and discipline in investing, which are often neglected but essential for long-term success. The Magic Formula is one of several investment techniques and theories, each with its own assumptions, methods, and risk profiles. From buy-and-hold to complicated quantitative models, these methods cover it all. Investors' goals, risk tolerance, and circumstances should determine their strategy.  In conclusion, stock trading demands cautious navigation and intelligent decision-making. Joel Greenblatt's Magic Formula helps guide investors. Its effectiveness depends on the investor and is not a one-size-fits-all solution. Thus, each individual must establish their own stock trading success route with the correct knowledge, method, and mindset.
Co-Authors A. Arif Dwi Nugroho Ade Sjafruddin Ade Sjafrudin, Ade Akbar, Habibullah Alexius Hanavie Andilas, Devi Destiani Andy Pangeran, Andy Angeline angeline Anik Juniwati Anis Setyaningrum Arif Tirta Kusuma, Arif Tirta Ats-Tsauri, Muhammad Ibrahim Audi Christian Tedja Tee Bita Parga Zen Budi Tjahjono Carolus Boromeus Sene, Carolus Boromeus Chandra, Melvin Christ Fernaldy Chandra, David Christine Tjokrorahardjo, Christine Daniel Hotber Nadapdap, Daniel Hotber David Wiyono Erlangga E C Oematan Erry Koriyanti Ferdinand Litan Florencia Debrina Soebagio Gerry Firmansyah Gregorius Satia Budhi Handiyanto, Ramada Aji Hanemas Panita Montiara Harry Patmadjaja Hendro Poerbo Prasetiya Henny Sutjiono, Henny Idha Royani Ika Hidayati, Permata Jazimatul Husna Jeffry Liongtono Winoto Jorena Jorena, Jorena Kuriawan, Yudhi La Ode Muh Munadi Liliana Liliana Martin , Martua Feizal Lamora Sihombing Meme Susilowati Michael Gunawan Iskak Moh. Farid Nurul Anwar Nugroho, Didit Prasetyo Nurul Qomariyah, Ismi Nurwegiono, Muhammad Octavianus Cakra Satya Ote, Yohanis Ana Prayogo, Michael Antonie Purnomo Purnomo Purnomo Purnomo, ' Putra Jaya, Jeremy Qomariah, Ismi Nurul Rachmasari, Fitria Melati Rio Febrianto Arifendi, Rio Febrianto Ronny Hartono Widjaja Salsabiila, Elsa Santoso, Gregorius Allan Serli Wijaya Soetam Rizky Wicaksono Solli, Indira Detari Stefanus Gunawan Sugiarto, Hansel Davin Suhartono . Susilo Ribut Anggarbeni, Susilo Ribut Timotius Denny Setiawan Tri Ngudi Wiyatno Widodo, Panut Wilujeng, Lilis Lestari Wimpy Santosa Wirduni, Mohammad Imam Wulandari, Deniar Yovita Vanesa Romuty Yudhi Kurniawan Yuswanto, '