So you want to be an investing superstar. Or at least retire comfortably with control over your own finances. Here’s a simple starting point for Buffett like returns.

1. Buy a basket of stock in the highest book to market decile, rinse and repeat. (Lowest price to book.)
2. Hold more cash when the market is above long term trend lines, deploy that cash when it is below.

http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

What do you think when you look at the above graph and consider the following?

More thoughts

• While markets are reasonably micro-efficient they are certainly prone to times of macro-inefficiency.
• The high risk premiums from equity market can be reasonably explained by investors taking a short term view. Those taking long term views are better placed to exploit the risk premium.

Related posts:

1. Why Isn’t Buffett on the Microsoft Board?
2. Buffett – Does What I Say
3. Ahead of the Buffett Curve
4. It takes money to make money
5. Look for future returns not market bottoms