I agree with your point completely. However, on the magic formula bit, I do highly reccomend beginning investors read Joel Greenblatt's book,"The Little Book t

I agree with your point completely. However, on the magic formula bit, I do highly reccomend beginning investors read Joel Greenblatt's book,"The Little Book that Beats the Market", in which he outlines the "magic formula". www.magicformulainvesting.com is the associated website with it. The magic formula basically sorts the US public investing universe by return on capital (EBIT / (net fixed assets + working capital) ), and earnings yield (EBIT/ EV). I do believe following the formula will likely outperform the S&P500 if your time horizon exceeds 3-5 years. Same goes for most proven value strategies, such as buying baskets of low P/E, low P/B, high piotrosky f-score, or net-net baskets.