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The Future for Investors, by Jeremy Siegel.    According to Siegel, someone who invested in a portfolio that mirrored the S&P 500 starting in 1957 (when the index was expanded to 500 companies) and never changed his portfolio, achieved over the next 40+ years a greater return than an investor who also mirrored the S&P 500 in 1957 but kept pace with all of Standard & Poor's numerous changes to the index since that time.  Put differently, Standard & Poor's updates, taken as a whole, have lowered investors' returns.  How can this be?  Although Siegel's book has its unique slant, it basically comes down to the fact that capitalization-weighted indexes (including the S&P 500) inherently overweight overvalued stocks and underweight undervalued stocks.  Over the years, as smaller-cap stocks were frequently replaced with larger-cap stocks--which disproportionally included overvalued companies--the index became burdened with high P/E stocks.  As a result, the performance of the index suffered.  The moral of this book is that stock valuation has a very important impact on stock returns.  

ISBN: 140008198X
Hardcover, 336pp
Pub. Date:
Mar 2005
Crown Publishing Group





"Jeremy Siegel's lively new book is much more than a typical Siegelian guide to asset allocation."

Peter L. Bernstein