! Real Returns Favor Holding Stocks
Jeremy Siegel is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania and the senior investment strategy adviser to WisdomTree Investments Inc. He is also the author of “Stocks for the Long Run” (fifth edition, McGraw-Hill, 2013).


John Croy from RI posted over 3 years ago:

I understand your argument favoring stocks over bonds for the long haul, and would agree. However, those of us over age 75 must guard against a severe drop in the market when a downdraft can erase 25-50% of our assets and we may not have the time to recover. Recognizing that not all bonds are the same, there is a class of bonds known as Convertible Bonds whose values have an "equity kicker", which may be a suitable alternative. However, trading in these bonds is not an amateur's game and professional advice is essential. Lumping all bonds into a single category does a disservice to your readers.

Jerry McC from TX posted over 3 years ago:

I am 79 years old. Bonds have two purposes, provide safety, and a dependable income stream. Today they do neither. I was 40/60 bonds/equities before 2008. Since 2008, with the exception of a little gold and some preferreds, I have been 100% equities. Lately, I have been moving to 15-20% cash. But still no bonds. I can by GE stock and get 3.35% or 10 years US Treasuries and get 2.5%. Which do you think will be worth more in five years (or 10)?

James Strite from PA posted over 3 years ago:

At this point in time the US has $17T in official debt and much more than that if you consider the Fed balance sheet and future govenment obligations. The personal and corporate debt is also high. Never has there been so much debt in the US. To ignore this point when telling us all how safe and wonderful stocks are makes me nervous about Prof. Siegel's thesis. Looking to me like a good time to have some cash (not all in USD's) and a bit of gold and other hard assets. Stocks will be great at some point. But, only after the US defaults (or hyperinflates first). To ignore the US debt chart that started parabolic in 1980 and pretend that stocks and all else are wonderful in the US seems like a stretch to me.

Sanford Levey from MA posted over 3 years ago:

I am 78 years old and in excellent health.I am contemplating taking 1/2 of my
401k which from my company's stable value fund and investing it in several conservative equity funds as IRA's.Is this advisable? Thanks

John Lalley from FL posted over 3 years ago:

The question of market valuation, is always answered by the market in the long term. If someone is in their 70's and retired, I would certainly not have all my assets in the stock market. Having said that, I agree over the next decade, that stocks are probable going to out perform bonds by a wide margin. As a matter of fact, if one looks at the expected inflation rate, (which is understated) then bonds will probably have a 1-2% negative return. I believe stocks provide the best chance to stay ahead of inflation and provide a small positive return even at these levels of valuation. If I were 70-80 (and I am) I would still have 50-60% in the stock portfolio distributed over small, mid-cap and large cap with 15-20% of that as International stocks. 30% short term bonds and 10% cash.
Thats my take on it.

Charles Rotblut from IL posted over 3 years ago:


We cannot give personalized investing advice.


Vaidy Bala from AB posted over 3 years ago:

In my experience, 2008 was bad for equity investors, me too I am. 75 and I am fully invested in stocks, 10% cash. Interests and dividends seem to work ok. The govt. here requires about 8% withdrawal from RIF account.p yearly. But, I do feel at least every six months some rebalancing is required to keep afloat.

Joe Alotta from IL posted over 3 years ago:

It is my observation that portfolios are build using average correlations. Unfortunately, in a crisis, correlations lock together and what you thought was uncorrelated becomes correlated just at the moment you need to sell something for money.

It is like having an insurance policy that looks really good except when you file a claim.

So I am wondering if anyone really thinks about these things besides me?

Edward Mueller from IL posted over 3 years ago:

Does anyone know what Jeremy means by "“fundamentally weighted indexing," instead of "captilization weighted" indexing?

Ed M

Charles Rotblut from IL posted over 3 years ago:

Hi Ed,

It means weighting an index by measures such as valuation, sales, earnings, yield, etc. instead of by market capitalization.


Pat from KY posted over 3 years ago:

Could you elaborate on the use of the 200 day moving average for avoidance of bear markets. 200 day average of the S&P? What are the trigger points for a decision?

Charles Rotblut from IL posted over 3 years ago:


Jeremy used the Dow Jones industrial average with a 1% band around the 200-day moving averages. Only moves above or below that band triggered a buy or sell alert.


Rick Grant from GA posted over 3 years ago:

In designing my portfolio, I had some of the same worry expressed by James Strite above. Thus I have invested in gold and other hard assets as inflation tools. It was interesting that the U.S. dollar took a higher ranking against other currencies during the world wide recession.

As I get older, the dividends from my individual stocks should continue to grow. I like this predictable stream of income, its annual growth and the fact that it is taxed at 15%. I am comfortable with the buy and hold method of investing. These individual stocks fluctuated in value ( including 2008 time period) and it does not make me panic. I am comfortable buying stocks at low prices and patiently waiting for them to appreciate in value as I enjoy the dividend. I find the PEG ratio to be very helpful when researching stocks.

My total investments have 2% in bonds. The steady income from my pension and Social Security is similar to holding bonds. That bond equivalent plus the 2% all together create a total bond value that is 50% for my portfolio.

Long term buy and hold investing is a pleasure.

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