Stocks For The Long Run by Jeremy Siegel – Book Review

Sure, I had learned about personal finance topics in my finance classes in my undergraduate degree. However, if I had relied on learning everything about personal finance from those classes, this blog would never have gotten started, and you most likely wouldn’t be reading it right now.

You heard me right folks. I am willing to bet that you can get a better education about personal finance yourself by reading some of the high-quality books out there then you can from any university professor. This whole debate is an entirely different matter (and one that I feel very strongly about – keep an eye out for a future post), so let’s get back to the subject of today’s post before I go off on too much of a tangent.

In January of 2007 (during a trip to Macchu Picchu, Peru with my family), I read “Stocks for the Long Run” by Jeremy Siegel for the first time. Since then, it has truly become one of my favorite personal finance/investing books of all time (up there along with A Random Walk Down Wall Street by Malkiel and What Wall Street Doesn’t Want You to Know and Swedroe).

I consider this my “investing bible.” I may even have a problem because I just realized that I have been sleeping with it no less than 2 feet away from me on the bookshelf for the past couple of years! haha

In this book, Siegel and his Wharton Business School research team explore pretty much every question you have or could ever wonder about regarding long-term investing in stocks, bonds, and cash-based securities.

In Part 1, Siegel examines historical data to determine what trends are present to discriminate how the equity and fixed income markets function. In Part 2, the research team analyzes different techniques to value securities and to predict the future returns investors can hope to obtain. Unfortunately for us, their findings indicate that future returns will be significantly lower due to the bleak outlook of dividends.

In Part 3, which is in my opinion, one of the most interesting sections of the book, Siegel analyzes how stocks and bonds have performed during specific periods in history. For example, he analyzed performance during the Sept. 11, 2001 disaster, during wars, and how they have performed when Republicans vs. Democrats are President of the United States. Some of the results are counter-intuitive!

Part 4 of the book explores various short-term periods in history in an attempt to discern whether or not patterns are present which can be exploited to profit when incorporated into one’s investment strategy. Unfortunately, the team pretty much finds that there are no short-term fluctuations that can reliably beat the market averages.

The final section of the book, Part 5, is my favorite portion because it basically summarizes how all of the evidence he presented in the previous Parts can be used to create an intelligent investment strategy. And guess what, he concludes that low-cost index mutual funds are the best way to go! How about that?! That’s why my investing strategy is based on fixed income and equity mutual funds instead of individual stocks.

One thing that I think could be improved upon in this book is to add additional detail showing example portfolios of how asset allocation should change throughout one’s life.

However, for the most part, if you are wondering anything about stocks, bonds, or any security for that matter, this is the book to go to!

Recommendation for purchasing the book (if you so desire)

If you’re interested in buying this book, I would recommend purchasing a cheap, used copy from Amazon. There are two editions available for purchase – 1) the 2007 edition and 2) the 2002 edition.

Personally, I would buy the 2002 edition because it is only $0.48 vs. $23 for the newer edition. I seriously doubt that the added material is worth >$20 more in purchase price, because the 2002 version is already very good!

How about you all? Have you read Stocks for the Long Run by Siegel? What did you enjoy and what would you change? What are your favorite investment and/or personal finance books?

Share your experiences by commenting below!