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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 103  
Subject: Re: Jeremy Siegel's book? Date: 7/30/2005 4:29 PM
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Author: Barolo97 | Date: 7/28/05 12:53 PM | Number: 62
Any thoughts on Jeremy Siegel's (sp?) book The Future of Investing?


I just finished this book a couple of weeks ago. Here are some of the key topics:

* In a lot of ways, this book picks up where Siegel's previous book 'Stocks for the Long Run', left off. However, he has changed his view a bit saying he now believes that you may be able to beat the TSM (Total Stock Market) Indexes by purchasing high dividend, older established companies, and you reinvest all dividends and holding on to all distributions.

* He emphasizes repeatedly how important it is to reinvest all dividends and retain all distributions, and never sell a single share of stock. He shows that in the bad times, the dividends usually remain safe for biggere established companies, and that you can buy more shares with each dividend. This is the classical 'dollar cost averaging' strategy applied to dividends.

* His statement is that the 'Tried the true will beat the bold and the new'.

* The Growth Trap. This is what you fall into when you buy a 'hot' high growth tech stock. He compares IBM to XOM, pointing out that IBM has had much higher growth in earnings and price over its history. However, with dividends reinvested, you would have done much better with XOM. This is because the market bids up the price of fast growing stocks like IBM, and you end up paying too much for each share that you buy. He shows that this greatly decreases the total return over the long term.

* He shows how the Growth Trap applies to sectors and even countries. He shows that even though China has been the fasted growing economy over the last five years or so, and you would have made much more money in other more established, older economies.

One question I had while reading this book is, what about people who are not reinvesting dividends? Like retirees who are spending their dividends? Would they still be better off with the 'tried and the true'? Or would they be better with the 'bold and the new'? There is no indication of the answer to this. This book seems to be aimed exclusively at the accumulation phase of life.

Russ
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