Saturday, March 17, 2007
stocks for the long run by Jeremy Siegel
" STOCKS FOR THE LONG RUN " by Jeremy Siegel --------------------------------------------------------------------- tHE FOCUS OF EVERY LONG TERM INVESTOR SHOULD BE THE GROWTH OF PURCHASING POWER - THE MONEARY WEALTH ADJUSTED FOR THE EFFECT OF INFLATION. tHE GROWTH OF PURCHASING POWER IN EQUITIES NOT ONLY DOMINATES ALL OTHER ASSETS BUT ALSO SHOWS REMARKABLE LONG-TERM STABILITY. dESPITE EXTRAORDINARY CHANGES IN THE ECONOMIC , SOCIAL, AND POLITICAL ENVIRONMENTS OVER THE PAST TWO CENTURIES, STOCKS HAVE IELDED BETWEEN 6.6 % AND 7 % PER YEAR AFTER INFLATION IN ALL MAJOR SUBPERIODS. tHE SHORT TERM FLUCTUATIONS IN THE STOCK MARKETS ARE INSIGNIFICANT WHEN COMPARED WITH THE UPWARD MOVEMENT OF EQUITY VALUES OVE TIME. iN CONTRAST TO THE REMARKABLE STABILITY OF STOCK RETURNS, REAL REURNS ON FIXED-INCOME ASSETS HAVE DECLINED MARKEDLY OVER TIME. sOME ECONOMISTS HAVE MAINTAINED THAT, THE SUPERIOR RETURNS TO EQUITY ARE A CONSEQUENCE OF CHOOSING DATA FROM THE us, A COUNTRY THAT HAS BEEN TRANSFORMED FROM A SMALL bRITISH COLONY TO THE WORLD'S GREATEST ECONOMIC POWER OVER THE LAST 200 YEARS. However, the ability to create value also springs from skiful management, a stable political system that respects property rights, and the capacity to provide value to consumers in a competitive environment. Swings in investor sentiment resulting from political or economic crises can throw stocks off their long term path, but the fundamenal forces producing economic growth enable equities to the regain the long term trend.
