Why did top strategist Joel Greenblatt change his investment strategy from a highly concentrated one to one that invests in hundreds of stocks? That is one of the many interesting topics Greenblatt covers in a recent interview with WealthTrack.
While Greenblatt used to invest in a very limited number of companies, today his firm is long about 300 stocks that score highest using his “Magic Formula”, and short about 300 companies that score lowest using the formula. Greenblatt says this newer approach leads to a lot less volatility than his previous approach, which makes it much more appropriate for average investors. “The best strategy for most people is the one they can stick with,” he says. Greenblatt also talks about what he says is the “big secret” in investing: patience. He notes that from 2000-2010, nearly half of the fund managers who were in the top decile performance-wise over the full decade had at least 3 individual years in which they were in the worst decile in terms of performance. He also talks about the benefits of an equally weighted portfolio and exchange traded fund investing.