In my largest brokerage account, I'm running a little over 1/2 of 1 percent of assets. And I'm okay with that.
If the Greenblatt model is to buy about 20 stocks that meet criteria and hold them for one year (and then sell), that'd be about 40 commissions per year for an individual follower. At say $8 per, that's $320 commission cost per year. With $25K invested, it's only $1250 per stock though. Still, the idea is supposed to work out okay over time, so the diversity might just act to smooth things out.
If somebody followed what Greenblatt seems to be doing himself --go very concentrated-- and which he suggested (?) for his kids or someone just starting out (again, go for a few stocks), then the person would maybe spend a little time to whittle down the possible buys to maybe 8-10 positions (every year). In which case, maybe 20 $8 commissions. $160 vs $250, but you use your judgment and time to select the stocks.
I say for $25K, it might be okay. For $100K, for me, I'd not want to give up 1% per year.
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Markets up this year, so I'm guessing Greenblatt model doing very well. Seems though that since publication of book or the past 2-3 years, model has not performed as historical results. I believe Mr. Greenblatt has said there've been times when model doesn't work for 2-3 year period. So current performance results don't invalidate his model or his enthusiasm for it.
IF somebody is really confident that the model works and garners 20% returns on an annual average, then if the alternative to going with the Greenblatt promoters (paying the 1% fee) is to buy bonds or etfs or mm funds or pfd stocks, then maybe just go for it and forget about the "measly" 1% charge: Focus on the 19% average gains to be expected which could/should/might exceed those alternative choices. For me, while I believe in the model, I have trouble coming to believe on a 20% avg. annual return. |
