Great food for investing thought by Larry Swedroe …
We recently discussed the issues with Bill Gross’s article lamenting the death of stocks. I wasn’t alone in rebutting Gross’s thoughts. Wharton finance professor Jeremy Siegel, whom Gross named specifically in his piece, also offered a rebuttal to Gross. The problem is that Siegel’s ideas on the lack of risk in stocks over the long term are also flawed.
Partly due to Siegel’s best-selling book, “Stocks for the Long Run,” many investors act as if stocks are only risky if your horizon is short. Unfortunately, this bit of wisdom is as right as the earth is flat. Let’s see why this is the case.
Simply put, we might have just been lucky that stocks performed as they did over the very long period Siegel studied. However, we can also look outside our borders to see if other nations experienced what we did for stock returns. Unfortunately, investors in other markets didn’t receive the kind of returns U.S. investors earned.