Jeremy Siegel has researched the performance of the 500 stocks that formed the original S & P Index and the 917 new firms added through the end of 2003. These findings, along with his original research into demographic and economic growth trends in both developed and developing economies, form the foundation of new paradigm for investing and building wealth.
Among Dr. Siegel's Key ideas is the growth trap. The incessant search “the next big thing,” “hot” stocks, expanding industries, and fast-growing countries leads to lower – not higher – returns. “Growth” lures investors into overpriced stocks in fast-changing and overly competitive Indus-tries where the few big winners cannot begin to compensate for myriad of losers. There is, in fact, a “paradox of growth” – what is good for the economy (productivity growth, formation of new businesses, increased capital spending) is often bad for individual investor.
Companies that are tried and true (often producing the same products for decades in slow-growth or even declining industries) have better returns than “the bold and the new.” The implications of Dr. Siegel's research extend to both industries and countries. Industry sectors that many regard as dinosaurs – railroads and oil companies, for example- often produce returns that beat the market. Countries regarded as economic basket cases, such as Brazil , yield better returns than with the fastest growth, like China .
Dr. Siegel shows how to play the coming shift in global economic power by understanding what constitutes the true new economy. His important new view of globalization shows that as the economic center of the world shifts eastwad, investors have a unique opportunity for continued prosperity. The pessimists, such as Peter Peterson, who declare that the age wave will send asset prices downward and crush the baby boomers' plans for retirement are dead wrong.
