Do you want to achieve financial freedom and live the life of your dreams? Do you want to learn how to invest wisely and grow your wealth exponentially? Do you want to discover the secrets of the rich and successful people who have mastered the art of money management?

If you answered yes to any of these questions, then you need to learn the magic formula for unleashing your wealth: the power of financial education.

## What is Financial Education?

Financial education is the systematic process of acquiring financial literacy, which is the knowledge, skills, and attitude necessary for making informed and effective decisions about money. Financial education enables you to:

- Understand the basic concepts and principles of finance, such as budgeting, saving, investing, borrowing, taxation, inflation, risk, and return.
- Apply these concepts and principles to your own financial situation and goals, such as creating a financial plan, choosing the best financial products and services, and managing your debt and credit.
- Evaluate the outcomes and consequences of your financial decisions and actions, such as tracking your spending and income, monitoring your net worth and cash flow, and reviewing your financial performance and progress.
- Adapt to changing circumstances and opportunities, such as coping with emergencies, taking advantage of market trends, and seizing new sources of income.

Financial education is not just about learning facts and figures, but also about developing a mindset and a behavior that will help you achieve financial success. Financial education empowers you to:

- Take control of your money and your future, instead of letting money control you and your life.
- Make smart and rational choices, instead of relying on emotions and impulses.
- Seek and use reliable and relevant information, instead of following myths and rumors.
- Learn from your mistakes and failures, instead of repeating them and giving up.
- Seek and accept feedback and advice, instead of being defensive and arrogant.
- Be proactive and creative, instead of being passive and complacent.

## Why is Financial Education Important?

Financial education is important because it can help you improve your quality of life and well-being, as well as contribute to the economic and social development of your community and society. Financial education can help you:

- Achieve your personal and professional goals, such as buying a home, starting a business, pursuing higher education, traveling the world, or retiring comfortably.
- Protect yourself and your family from financial risks and shocks, such as losing your job, facing a medical emergency, or experiencing a natural disaster.
- Build and maintain your financial security and stability, such as having enough savings, investments, insurance, and retirement funds.
- Enhance your financial confidence and competence, such as being able to negotiate, communicate, and collaborate effectively with financial institutions, professionals, and peers.
- Fulfill your financial responsibilities and obligations, such as paying your taxes, bills, and debts, and supporting your dependents and beneficiaries.
- Support your financial values and ethics, such as being honest, responsible, generous, and compassionate with your money.

Financial education is also important because it can help you create and seize opportunities for wealth creation and multiplication, such as:

- Identifying and exploiting your unique talents, skills, and passions, and turning them into profitable ventures.
- Diversifying and optimizing your income streams, and generating passive and residual income.
- Leveraging and maximizing your financial resources, such as using debt wisely, compounding interest, and reinvesting profits.
- Expanding and growing your financial network, such as finding mentors, partners, and customers, and joining communities and organizations.
- Learning and applying the best practices and strategies of the wealthy and successful, such as the magic formula investing.

## What is Magic Formula Investing?

Magic formula investing is a simple and effective investing strategy that teaches you how to select and buy high-quality stocks at low prices, and sell them at high prices, thereby earning high returns on your investments. Magic formula investing was developed by Joel Greenblatt, an investor, hedge fund manager, and business professor, and described in his best-selling books, The Little Book That Beats the Market and The Little Book That Still Beats the Market⁶⁷.

Magic formula investing is based on two criteria: the stock price and the company's return on capital. The stock price is measured by the earnings yield, which is the earnings per share divided by the current stock price. The return on capital is measured by the earnings before interest and taxes divided by the net fixed assets and working capital. The magic formula ranks all the stocks in the market based on these two criteria, and selects the top 30 to 50 stocks that have the highest earnings yield and the highest return on capital. These are the stocks that are undervalued by the market, but have strong earnings potential and competitive advantage.

Magic formula investing requires you to follow a disciplined and unemotional process, which involves:

- Using an online stock screener tool, such as the one provided by Greenblatt on his website⁶, to select the 30 to 50 top-ranked stocks based on the magic formula criteria.
- Buying an equal amount of each of these stocks, and holding them for one year.
- Selling the losing stocks before the one-year mark, and taking advantage of the tax benefits of offsetting your gains with your losses.
- Selling the winning stocks after the one-year mark, and paying lower taxes on your long-term capital gains.
- Repeating the process every year, and reinvesting your profits.

Magic formula investing is a proven and tested strategy that can help you beat the market's average annual returns, and achieve superior performance and results. According to Greenblatt, the magic formula has generated annualized returns of over 30% from 1988 to 2004, compared to the S&P 500's 12.4%⁷.

## Conclusion

Financial education is the key to unlocking your wealth potential and achieving financial freedom. By learning and applying the concepts and principles of finance, you can improve your financial situation and goals, and protect yourself and your family from financial risks and shocks. By developing and practicing the mindset and behavior of financial success, you can enhance your financial confidence and competence, and fulfill your financial responsibilities and obligations. By discovering and implementing the best practices and strategies of the wealthy and successful, such as the magic formula investing, you can create and seize opportunities for wealth creation and multiplication, and live the life of your dreams.

## FAQs

Q: How can I start learning financial education?

A: You can start learning financial education by reading books, articles, blogs, podcasts, and videos on finance, such as the ones written by Joel Greenblatt and other experts. You can also enroll in online courses, workshops, seminars, and webinars on finance, such as the ones offered by the Investor and Financial Education Council³⁴ and other organizations. You can also join financial education programs, clubs, groups, and communities, such as the ones organized by the Bangko Sentral ng Pilipinas⁵ and other institutions.

Q: How can I apply the magic formula investing strategy?

A: You can apply the magic formula investing strategy by following the steps outlined by Joel Greenblatt in his books and website⁶⁷. You can also use other online tools and platforms that support the magic formula investing strategy, such as the ones provided by Magic Formula Investing⁶ and other websites. You can also consult with financial advisors, planners, and coaches who are familiar with the magic formula investing strategy, such as the ones affiliated with Gotham Asset Management⁶ and other firms.