Editor’s note: Today, we’re continuing our weeklong series on the most powerful investing, trading, and wealth-building ideas we’ve encountered in the books we’ve read. These books have shaped the way we look at businesses and the markets.
What REALLY Works on Wall Street
What really works on Wall Street?
James O’Shaughnessy knows…
He’s not guessing. He did the math…
He got a hold of the most powerful historical stock-market databases on Earth, with data going back to 1926.
And he crunched the numbers in every possible way, trying to figure out what works on Wall Street.
He published his results in his book What Works on Wall Street. The updated version of that book came out in late 2011, and it is excellent.[ad#Google Adsense 336×280-IA]It covers more than 250 strategies.
It’s the “Bible” of stock market strategies… And it’s an indispensable book in my office.
So what really does work on Wall Street?
In short, combining some valuation measure with some measure of trend…
It almost doesn’t matter how you measure your trend (as long as it’s up) or value (as long as it’s cheap).
As long as you have value and the trend, the odds are in your favor.
If you had invested $10,000 in O’Shaughnessy’s specific “Trending Value” strategy in 1965, it would have turned into $48 million by 2009. Based on return versus risk taken, that was the best-performing idea out of the hundreds O’Shaughnessy tested.
Let me repeat that… $10,000 turned into $48 million.
Another strategy turned $10,000 into $298 million… going back to the 1920s. That’s buying companies that return cash to shareholders (through dividends and buybacks). I wrote about that strategy here.
With O’Shaughnessy, it’s just the facts. He says:
There’s nothing random about long-term stock market returns. Investors can do much better than the market if they consistently use time-tested strategies…
This book is not a casual read… It’s not filled with entertaining stories to keep you reading. But it is full of answers…
It is full of facts… Like: Which value measure works the best in which sectors… whether small stocks are worth the risk or not… and which trending indicators work the best.
If you want to know what strategies REALLY work, you need to keep a copy of What Works on Wall Street on your desk, like I do.
I would have happily paid 10 times the cover price… Heck, I would have paid 100 times the cover price. The book is that valuable to me.
If you’re serious about making money in the markets, you can buy What Works on Wall Street from Amazon for less than $25…
Source: Daily Wealth