Siegel's Enhanced Strategy

[Spanky]

According to Jeremy Siegel's new book, his enhanced strategy, I believe, is as follows:

10 to 15% into each of the following categories:
1. High Dividend Stocks, e.g., REITs
2. Global Companies, i.e. S&P Global 100 index
3. Sector - Energy/Natural resources, health care, consumer staples.
4. Value (i.e., low P/E) stocks

The rest is a World Index fund.

Any opinion about this strategy?

[Nords]

I wonder how much of his portfolio is comprised of book royalties, at the rate of one new strategy book per decade...

[Michael]

He doesn't seem to think much of the S&P 500.

[rapoole]

" I wonder how much of his portfolio is comprised of book royalties, at the rate of one new strategy book per decade..."

I am disappointed in the new Siegel book. It really doesn't offer much more than a collection of Siegel's opinions on various subjects, with slim supporting evidence in many cases. Most of the evidence is anecdotal. The "strategy" he presents is incoherent. Its surprising really, because the first book, Stocks for the Long Run, presented a pretty compelling argument, supported by convincing evidence. That book and Bogles book on mutual funds are the two most important books on investing I have read.

Some of Siegel's ideas in the present book are interesting, but no more convincing than the kind of stuff you read in Money Magazine.

[Bookm]

I suppose I have a better opinion of Siegel than most. Maybe it's because he's been a long-time proponent of indexing. And he still maintains that belief in his new book, stating that investors should depend on indexing to up half of a portfolio's core holdings. He's been refered to in a positive light on various occasions by the likes of Bogle, Bernstein and Buffett.

I read an article about a week ago at Univ. of Penn Wharton School's website on Siegels' new book, so I refered back to that article for this data. As I mentioned, Siegel backs about half in index funds, and the other half in what he calls, "return-enhancing strategies, as was already mentioned. However I read a slightly different asset split, which is as follows:
55% - US & Canada
28% - Europe
9% - Japan
3% - remainder of developed Asia
5% - EM

I also understand his enhancements did involve REITS, S&P Global Index and high dividend dow stocks (not necessarily the Dogs tho, IIRC)- which Siegel mentions using the ETF DVY. Could you possibly provide a link to the split you mentioned, to compare with what I thought I understood?

I also thought that there's additional research highlighted in the book which for one, referenced the historical returns of the S&P 500 components from the 1950's on. Additionally, I thought that there was research on the demographics of various countries, market sectors and topics pertaining to Social Security. Again, I haven't read the book yet, but am basing this on several interviews, book summaries and articles from U. Penn, cbsmarketwatch.com, money.com and thestreet.com, as well as a two-part series in my newpaper from a syndicated columnist who's name escapes me (Jeff Brown perhaps?).

An issue that I'm sure would have some investors uncomfortable (not myself and certainly not ben) is Siegel's recommended exposure to say sectors such as energy, reits and even the untraditionally large piece given to international equities. True some studies have shown decreased volatility in portfolios that include individual issues considered quite risky. But all the research in the world won't make some people budge one inch.

I'd be curious to hear from anyone who has read any of the new book. I didn't see where anyone in this thread has done so yet. If I missed it, I apologize.

Bokm

[preben]

I loved "Random walk" but have not read the new one. Cheers!

[unclemick]

Shades of Yogi Berra!

'It's Deja Vue all over again'.

I was there to some extent in the 70's, 80's and even the early 90's. Given my track record versus plain old Ben Graham/Bogle and Index funds - I'm a tad skeptical this time around.

That said - two things:

1. There are more/better choices this time around.

2. If I were to become an ex - pat, Then global diversification would be on the table in a heartbeat. Also possibly commodities with current choices. My old timey favorite was copper - back door Southern Peru Copper via Anasarco. When gold stocks get back to 4% current yield - maybe.

[peteyperson]

According to Jeremy Siegel's new book, his enhanced strategy, I believe, is as follows:

10 to 15% into each of the following categories:
1. High Dividend Stocks, e.g., REITs
2. Global Companies, i.e. S&P Global 100 index
3. Sector - Energy/Natural resources, health care, consumer staples.
4. Value (i.e., low P/E) stocks

The rest is a World Index fund.

Any opinion about this strategy?

I thought in the interview that Bookm cited that Siegel had some interesting comments on what had done well in the markets. Things like roadroad stocks outperforming the S&P 500 index because they were cheap. Other things like the 1957 S&P 500 index outperforming the changed S&P 500 index because the committee tends to add stocks that have become big players and have already run up (essentially growth stocks).

In short, he was saying that value stocks win out and higher dividend payers can do well (if you ignore the tax implications). For someone with no taxes on dividends or to a lesser degree deferred taxes until withdrawal, that may work. For others it tends to need a fixed 10% saved & invested and paying any tax costs out of the remaining 90% one planned to use for living expenses. This is the only way higher dividend stocks can be reinvested in full and beat the lower payers.

Buffett makes a similar point that high dividends due to taxation are not the way to go and deferral of long-term capital gains with no dividends is a better strategy. I think what it turns out to be is that companies as a group poorly manage their cashflow if left to their own devices. Thus as a group you are better off it they are left with less of it to screw up. Buffett buys the higher quality businesses who specifically manage their cashflow far better than average and so for those select few it makes sense to let them do that and save on the taxes. If one is not willing to hold a concentrated portfolio of individual qualify stocks that manage cashflow better, then I suspect higher dividends would work out better on an index basis if you sidestep the taxes on the dividends by paying out of pocket and (in the example) saving the 10% & reinvesting all of it. If that costs an extra 1%, you are only better of from a wealth building perspective if you would have saved 11% instead.

Petey

[ES]

This is my first post here. I see a few of my old friends have been posting here as well. I don't know how often I'll be able to contribute but when I can I will.

Siegel has done some good stuff in the past. Someone mentioned his book revenues. That make's me wonder a bit about his current motivations as well. Ten years ago it might have made sense to make comparisons to the S&P 500. Today it's obvious that the total market is a better overall barometer. I wonder why so many of these supposed "gurus" keep using the 500?

[preben]

You are ofcourse right Ronin. I stand corrected.
ES; welcome onboard!!

[cute fuzzy bunny]

ES - Welcome aboard!

Its often interesting to see what authors/experts actually do with their money. I had a look at Bogles portfolio a while back. At least at that time, very little money in index funds. A lot in mid cap actively managed funds. Quips were that the money had been there a long time and he didnt want to take the capital gain.

[Spanky]

ES - Welcome aboard!

Its often interesting to see what authors/experts actually do with their money.

I am wondering about the same thing. Have they ever claimed that they practice what they recommend? Maybe Buffet does what he says.

[ES]

Thanks Ben & th!

I haven't seen Bogles portfolio in a long while. He used to have just about every Vanguard fund there was in his port. I remember capital gains where a big concern for many of his funds. Does anyone have a link to a recent rundown on his current port? I'd heard he'd been adding a lot of bond stuff the last few years.

[peteyperson]

ES - Welcome aboard!

Its often interesting to see what authors/experts actually do with their money. *I had a look at Bogles portfolio a while back. *At least at that time, very little money in index funds. *A lot in mid cap actively managed funds. *Quips were that the money had been there a long time and he didnt want to take the capital gain.

Considering Bogle's index only mantra over the years it is surprising to hear he owns midcap active.

Petey

[cute fuzzy bunny]

As usual, you cant get complete agreement on what the term 'index' means. Bogle says 60% of his portfolio is in index funds; other people with credible arguments say its really ~38% as several of the funds bogle owns track an index that isnt a traditional index.

Even vanguard doesnt agree with their own 60% statement...if you pull up the vanguard web site and ask it to give you 'index funds only', they dont list several of the funds that the vanguard press people call 'index funds' that bogle holds...