Monday, July 13, 2009

Siegel Date Called Into Question: Stocks for the Long Run Flawed

The link is to another blog which provides a link to the Jason Zweig Wall Street Journal article about the flawed data Professor Siegel has used in his book Stocks for the Long Run. The book in question had become the bible for most planners (including myself.....but no longer), but the assumptions are being called into question and for good reason - they are highly flawed. You can link to the blog post and article to learn about those flawed assumptions, but suffice to say there isn't much to say. I've quoted and linked to Jeremy Siegel many times in the past and will continue to follow him, however it appears that this professor may be a bubble legend....and this bubble has been popped. The damage however is monstrous as nearly all planners and investment advisors have been schooled in the Stocks for the Long Run methodology. It seems we (yes, I include myself) allowed ourselves to believe what we wanted to believe and instead of trying to design reasonable methods to meet goals, we became cheerleaders for stocks and resorted to almost a religious faith in them as the singular way to meet a clients goal. Things have now changed, its not that Stocks aren't a good invest in the long run or that many of the truths I and others held dear are no longer - its that they may have been misapplied.

More on this to come.

Scott Dauenhauer CFP, MSFP, AIF