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Product Description
Stocks for the Long Run set a precedent as the most complete and irrefutable case for stock market investment ever written. Now, this bible for long-term investing continues its tradition with a fourth edition featuring updated, revised, and new material that will keep you competitive in the global market and up-to-date on the latest index instruments.
Wharton School professor Jeremy Siegel provides a potent mix of new evidence, research, and analysis supporting his key strategies for amassing a solid portfolio with enhanced returns and reduced risk. In a seamless narrative that incorporates the historical record of the markets with the realities of today's investing environment, the fourth edition features:
- A new chapter on globalization that documents how the emerging world will soon overtake the developed world and how it impacts the global economy
- An extended chapter on indexing that includes fundamentally weighted indexes, which have historically offered better returns and lower volatility than their capitalization-weighted counterparts
- Insightful analysis on what moves the market and how little we know about the sources of big market changes
- A sobering look at behavioral finance and the psychological factors that can lead investors to make irrational investment decisions
A major highlight of this new edition of Stocks for the Long Run is the chapter on global investing. With the U.S. stock market currently holding less than half of the world's equity capitalization, it's important for investors to diversify abroad. This updated edition shows you how to create an “efficient portfolio” that best balances asset allocation in domestic and foreign markets and provides thorough coverage on sector allocation across the globe.
Stocks for the Long Run is essential reading for every investor and advisor who wants to fully understand the market-including its behavior, past trends, and future influences-in order to develop a prosperous long-term portfolio that is both safe and secure.
From the Back Cover
For more than a decade, Stocks for the Long Run has been the authoritative guide to understanding market forces and building a successful portfolio. In this new fourth edition, Jeremy Siegel updates his argument for long-term stock market investment with: comparisons of ETFs, mutual funds, and index options and futures; evidence that the rapid growth of emerging markets will not only continue but may accelerate; insight into the benefits of fundamental indexation over market value indexation; an updated look at the surprising validity of Calendar Effects; and fresh analysis of the best-performing stocks since the formulation of the S&P 500 Index.
Praise for previous editions of STOCKS FOR THE LONG RUN
"One of the ten best investment books of all time."
--The Washington Post
“A simply great book.”
--Forbes
“One of the top ten business books of the year.”
--BusinessWeek
“Should command a central place on the desk of any 'amateur' investor or beginning professional.”
--Barron's
“Siegel's case for stocks is unbridled and compelling.”
--USA Today
“A clearly written, neatly organized, highly persuasive exposition that lifts the veil of mystery from investing.”
--John C. Bogle, Founder and former Chairman, The Vanguard Group
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Customer Reviews
So, stocks for the long run, then? Well, it looks that way -- if you have a 200 year holding period. The graph is on a logarithmic scale, which means that a given percentage drawdown will have the same size anywhere on the graph. Judged by this measure, stocks have been much riskier, with the Wall Street Crash and dot.com bubbles showing much larger drawdowns than either bonds or bills (the credit crunch would be similar in scale, too). Additionally, it took at least 60 years -- from 1801 to 1861 -- for stocks to achieve an aggregate return above any other asset class.
Over shorter periods the outperformance of stocks is by no means guaranteed, and this information is a lot more relevant to most investors than the 200 year returns. Most people have a savings rate which peaks in their fifties, with a retirement age of 65 this doesn't give much time for the higher returns from stocks to always win out. I'm guessing most people will have a weighted average horizon till retirement of no more than 25 years. It must be noted that we had a recent period of 30 year returns where long-term bonds beat stock returns (a period going up to the 2009 lows).
Bonds and bills performed poorly over the 20th century due to persistently high inflation. However, now investors have access to a new product -- inflation-linked bonds -- which guarantee real returns whatever the inflation rate. Given this fact, and that stocks can underperform for long periods, there's no reason why stocks should be anymore than just another part of a diversified portfolio for many investors. (There are only three references to inflation-linked bonds in this book's entire index!)
Siegel points out that due to their mean-reverting returns, stocks become less risky over longer holding periods. However, this fact also means that future returns are likely to be low after a period of sustained high returns. Instead of buying-and-holding a large allocation to stocks, this means that a lot of investors should become "strategic market timers" by buying more stocks during bear markets and vice versa. (That said, it does make sense for young investors to start off by buying all stocks -- this is known as taking a "lifecycle approach".)
Siegel's book is incomplete in at least three ways. He needs to more fully explain the role of inflation-linked bonds (see Zvi Bodie), he needs to better explain the process of long-run mean-reversion (Andrew Smithers), and he should explain how an investor's proportionate allocation to stocks depends on their stage in the lifecycle (Ian Ayres and Barry Nalebuff).
There's a lot of other information in this book, for example on behavioural biases, momentum investing, and calendar anomalies. It isn't a bad book by any means, but it is guilty of ignoring valid counterarguments in its all pervading bullishness for stocks.
Still one advice to Siegel for his next edition: make the graphs a bit smaller...
While this study proves that stocks outperform all other investment alternatives, readers should notice that stocks performed well even though the dollar lost more than 90%. Why is this important? Have you ever heard the media trying to make us believe that weak dollar is bad for stocks? This study shows how the media is completely wrong.
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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