Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read. Today, we'll hear from JLP at AllThingsFinancial who says:
"I would have to say that my favorite personal finance book is actually an investing book. It is the newest book by Jeremy Siegel called The Future for Investors – Why the Tried and the True Triumph Over the Bold and the New. The book is basically what Professor Siegel discovered while doing research for Stocks for the Long Run, which is that the companies that were in the S&P 500 when it began in 1957 outperformed the stocks that were added to the index over the years. In other words, the new companies that were added to the index over the years actually put a drag on the index’s performance.
The reason for this is that as the index tried to adapt to the changing economic landscape it added companies from “hot” sectors like technology and banking where expectations were high. It turns out that “expectations” were the key. When expectations are too high investors tend to overpay and then end up underperforming the rest of the market. When expectations are low, investors are able to find companies that are reasonably priced and have a much better chance of outperforming the market.
Anyway, the book is full of interesting observations written in an easy-to-understand way. If you read this book and apply it, you will be a better investor."
Looks like I have another book to add to my "to read" list.
Click here to read part 6.
Good review-I think I'm going to try this strategy when I look for a new wife :) Have a great week end!
Posted by: Steve Mertz | July 22, 2005 at 10:22 AM