There was an interesting interview with Joel Greenblatt on Morningstar today. Greenblatt stated that buying an index weighted toward stocks that are cheap, not just big, is a smart way for individual investors to beat the markets.
Below is a brief excerpt followed by the video:
Well, big picture, The Little Book, which I still love very much, describes a strategy that individuals can use to pick stocks for themselves and create their own portfolio. When I wrote it, I obviously didn’t even expect it to be as popular as it was, and I did receive a lot of demand for people to help them do this because it’s very hard to put together a portfolio of 20 or 30 stocks, keep track of them, keep track of your taxes, all these things.
As it turns out, most people actually don’t want to do it themselves. It’s too involved, it takes too much time, and there is a lot of complicated record keeping. So, the biggest request I got after writing the book was, "Can you please just do this for me?" So, through our continuing research, we actually were able to design a strategy that should work very, very well for the small investor and we recently made that available for small investors.