The Future for Investors

The Future for Investors by Jeremy J. Siegel (look at the size of his head, you know he is smart) is a solid book. It is divided into essentially five parts. First, he discusses some history of investments, and explains that there is a confusion about growth stocks, and why they are good stories, but not necessarily good investments. Through a good number of pictures and whatnot, he explains that the return on investment is a different entity from the growth of any particular company.

The second part of the book can be summed up in two words: Bubble trap. You buy some stuff that has gone up astronomically in price recently and you will get burned. Pages 71 through 124. You can skip it.

Part three is the meat. Here he explains what works in the market from his perspective, and gives good evidence for it. Essentially, he explains that the source of all investment returns is from earnings, and these are reflected most transparently into good stock returns by purchasing reasonable valuations on dividend paying stocks, as they produce good returns. This is true even if the market as a whole is dropping, because then you simply obtain the shares at a cheaper cost.

Part four is a bore. Again, skip it. People are going to be old in the USA and young in other parts of the world. Why should you care? Because a large portion of the market's return will be from the international market. End of story.

Finally, he ends the book with investment recommendations that are fairly specific. If one cannot buy a sufficient quantity of individual stocks, then she/he may buy a ETF or exchange traded fund, that represents all of the available stocks within a particular sector/region/niche. Also, he describes individual sectors and strategies, such as oil, health care, and the "Dogs of the Dow," that one can use to enhance a standard well balanced international portfolio.

So now I will put my money where my mouth is. Of course, it is 1:00 AM on a Saturday, so I will need to put in a order for the coming week. He recommends ETFs of large multinational companies. In order to follow his advice, I will purchase five hundred dollars worth of the shares of IOO ETF, traded by iShares, which represents the largest global 100 multinational companies on the planet earth. Take that WAG!!!!!

We shall see.......