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Stocks for the Long Run

May 16, 2005 -- Jeremy Siegel a finance professor at the University of Pennsylvania's Wharton School is the author of the often-cited book called, Stocks for the Long Run. Siegel says there are good reasons for stocks' historically higher valuations, but he also warns that this may result in lower returns for stocks in the future. According to Siegel, stocks are safer than bonds or cash because of inflation. Siegel believes that the wild swings in the market are largely unpredictable and it really doesn't pay to jump in and out of stocks. He advocates that investors spend time in the market; don't market time. Siegel is not a trader, although he acknowledges a market-timing tool that he contends has more reliability than others: a 200 day moving average strategy- which is the average of the last 200 days of prices for a stock. When the daily price of the stock is above its moving average, you keep holding. If it breaks below the average, it's a bearish signal and time to sell. As a side note, Siegel notes that short term thinking can leave substantially less than they would have gained by staying the course in stocks. Siegel claims that there is a limit to the value of any asset. This came to fruition in 2000.



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