The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New by Jeremy J. Siegel (2005)

In his earlier book, Stocks for the Long Run : The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies the author identifies the stock market as the place to be to fulfill long(er) term investing goals. In this followup, a non-mainstream view of selecting which particular stocks (and market segments to invest in) is presented, invest in established companies (paying good dividends) and avoid IPOs, as you have little chance to find the Microsoft (or even IBM), and newly issued stocks severely underperform. Dividends allow investors purchasing additional shares of the company, when times (or valuations) are bad, so in the end this leads to a significantly higher number of shares owned in the company. As for market segments, established companies with recognized brand names is the place to be, very similarly to the approach taken by Warren Buffett most times. While the author does not take its thoughts to their full conclusion, as to suggesting 100% allocation of one's funds into these "return enhancing" strategies, you will still be better off using these strategies, as compared to following the indexing crowd. In the second part of the book, a very optimistic view is painted, on how the US boomer retirement (and selling their fixed income and stock market assets) will play out. As per this view, the getting much richer investors in China and India might buy up these assets, and at the same time serve as a workforce to produce most of the goods in the world (while US, Europe, Japan retirees enjoy a pleasant retirement). The one missing point here seems to be, on why the investors would be willing to buy into ailing US, European and Japanese businesses (which might not even have a hardworking workforce to rely on, as taxation could be significantly increased to provide for the Social Security and Medicare of the boomer retirees), when they can invest into the bonds and stocks of their own country. I guess the thought is, that many of the existing "old" companies going international should provide a better investment than those newer companies. Of course, giving higher valuations to "home based" newly formed companies could become a self fulfilling prophecy, as the world might become less integrating than it is today, as those new powerhouse countries are less committed to international trade as the US is today. Recommended.

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