Did You Win Jeremy Siegel's New Book?

Dear Friends,
Back in May I reviewed “The Future for Investors,” the new book by Prof. Jeremy Siegel (Read my May 23 column about his remarkable book). Nearly 200 of you wrote explaining why you deserved one of the complimentary copies the publisher had generously offered “Your $ Matters” readers.

I realize it seems like it’s taken a long time to announce the winners, but I needed to install and adjust to some new technology. I promise the wait won’t be as long the next time this column has a similar offer.

As you may know, Prof. Siegel is credited by many for sparking the “index fund” approach to investing through the publication of his first book, “Stocks for the Long Run.” In his latest book, he has tweaked his philosophy somewhat; in general, he still likes stocks, but warns against investing in high-flying “growth” stocks (think “Google”). Instead, he says that, historically, much more money has been made by investing in (boring) “value” stocks and reinvesting the dividends they pay.

He also thinks an emerging investor class in countries such as India and China will be more than happy to buy U.S. stocks, thus allowing us to avoid a collapse in stock prices if and when baby boomers sell their shares to finance their upcoming retirements.

Several of you wrote that you got “burned” in the thre-year bear market that started in March 2000 and hoped Prof. Siegel’s advice would give you the courage and direction you need to venture back into stocks. Others related stories of parents or grandparents whose investments in dividend-paying stocks were once thought to be “quaint” and now seem positively brilliant.

As always, there were many individuals who expressed a sense of responsibility to invest wisely so they can take care of their families, send their children to college, pay for music lessons, and, as one man put it, be able to buy the ballet slippers his little girls would need.

In his book, Prof. Siegel talks about looking for individual stocks that have price-earnings (P/E) ratios that are lower than those of similar companies. This is just a starting point.

If you’re like one of the two individuals who wrote to say they would like Prof. Siegel's book to help them manage their multi-million dollar portfolios, buying individual stocks isn’t a problem. In this case you can afford to buy stocks in blocks of 100 or more shares, reducing your transaction costs. More importantly, you have sufficient money to diversify by buying companies across many different industries.

However, investing in individual stocks can be expensive if you’re only buying a few shares at a time. You have to pay a transaction fee (commission) every time you buy or sell shares. (I know that a number of companies allow you to purchase shares through “dividend reinvestment plans,” but a DRIP can create a tax nightmare when you sell your stock.)

In addition, if you can only afford to accumulate shares of a few companies at a time, those stocks are eventually going to make up too big a percentage of your portfolio. As a result, you’ll be taking on more risk that you should.

Fortunately, the folks at the mutual fund rating service Morningstar have provided “Your $ Matters” readers with a list of their favorite large-cap value mutual funds. These tend to own the kinds of stocks Prof. Siegel recommends, although some, such as T. Rowe Price Equity Income, place a bigger emphasis on stocks that pay dividends than others.

I strongly recommend reading what Morningstar’s analysts say about these funds and then pick one. Because they tend to invest in the same types of companies, it doesn’t make sense to invest in more than one of these funds -- you’ll just get overlap and extra statements. Read the prospectus that comes with a fund before committing any money to it so you are sure you know what you are investing in.

The benefit of using mutual funds, of course, is that you get diversification no matter what size investment you make. In addition, most mutual funds can accommodate the automatic monthly (or more frequent) investing program a number of you said you are interested in.

Morningstar’s Favorite Large-Cap Value Funds:

No-load:

Clipper – CFIMX

ICAP Select Equity – ICSLX

Oakmark I – OAKMX

Oakmark Select I – OAKLX

Sound Shore- SSHFX

T. Rowe Price Equity Income- PRFDX

Vanguard U.S. Value- VUVLX

Load:

American Funds Washington Mutual A- AWSHX

Please keep in in mind that this list is just a beginning as it only includes U.S.-based firms. Prof. Siegel is a big proponent of owning stocks of foreign companies, too. At the Morningstar website – http://www.morningstar.com – you can search for mutual funds that own these types of stocks.

Here are the 30 recipients of “The Future for Investors.” Please be patient. Your books will be sent from the publisher.

Enjoy!

Gail

Hi, Gail,

My Dad used the same philosophy when investing. Since he worked for Procter and Gamble, he continued to buy P&G stock and re-invest his dividends over the 28 years he was employed. This gave him the ability to retire at a relatively early age of 52. He did diversify into more stocks that provided dividends just before P&G plummeted back in 2000.

I’m in the Air Force and I’ve tried to follow the same philosophy. With the majority of the stocks and mutual funds I hold, I reinvest the dividends automatically. When I counsel my younger troops, I try to impress on them to invest some money and try not to make a “quick buck”.

There is no reason to look at your mutual fund every day — longevity is where it’s at. I’m looking forward to reading the book and passing on the information to a new generation of investors.

Thanks

Michael

Gail —

I got slammed pretty hard in the late 1990's and I am still digging myself out of the mess five years later. I am looking for an investment opportunity for my excess cash and retirement funds. I am a novice in this regard, but I am aware that certificates of deposit aren't going to get me anywhere. However, since I lost about fifty percent of my portfolio, I am hesitant to invest on my own. I know I need some guidance for future investments and I am hoping that this book will provide it.

Sincerely,

Mark

Dear Gail —

Eight years ago, when I asked my wife to marry me, she was laboring under heavy debt not of her making in order to raise her two little girls on her own. I was not wealthy, but I got the vultures off of her back and let me tell you it was a heavy burden lifted from her shoulders. I promised her then that NEVER AGAIN would a creditor call her about payment, that even if something were to happen to me I would provide for her and our girls. We still don’t make a lot of money, but through strict saving and careful investing, I have kept that promise and always will. I spend a lot of time and effort trying to make smart investments for my family; this book would be a great help in that endeavor.

Thank you.

Scott

Gail,

Got no plan for my future years. Need to develop a plan/goal or something. All I have is my retirement check and a small TSP. I do not believe it will be enough...

Gaylord

Hi, Gail —

I'm already retired and living on Social Security. After taking various expensive seminars on investments in such things as stock options and index options, I'm still looking for an investment foundation that has a solid foundation that is kind to someone with limited investment capital.

Cheers,

Warren

Gail,

As I write this our 401(k) and mutual fund papers are spread out on the floor. My wife and I began investing for our future retirement about three years ago. We are 48 & 46 respectively and we started late but not too late to get started.

Being a rookie investor I have on more than one occasion pondered the best direction for both of us to achieve a measure of success with the remaining years we have to produce income. We have been reticent about diving into the market especially after watching my parents and many of my friends suffer through the stock slump of recent years. Jeremy Siegel's approach sounds like "down-home" common sense for future investors that can not be easily discerned by inexperienced ones.

Carl

Hi Gail,

I'm 43 years old and had worked for AT&T for 25 years before being laid off 2 months ago. AT&T was very helpful in bringing in experts to assist us with this life transition, however everyone seems to have their own slant on how to invest and what to invest in. I am currently receiving termination money and have my 401(k) and pension to consider, along with a sizable chunk of money from an inheritance. My husband and I purchased a home together and were blessed with a beautiful baby girl 2 years ago.

My goal is to secure my family's future, but also to ensure that our daughter is cared for should anything happen to myself or my husband.

Thank you,

Sandy

Dear Ms. Buckner,

I really need this book because I am a middle-aged guy who has made some bad investments and really needs to get back on track. And I trust your judgment that Professor Siegel is someone to whom we should listen when it comes to investment advice. I would use it to get better educated on what constitutes a good investment and I would then take action to improve my investment choices.

Thanks,

Lance

Gail —

I will shortly be getting married, and as such, planning for the future has become more important than it ever has been. In the future, we'll have kids, who will eventually need financial help with college. Further in the future, I'd like to be able to retire comfortably. Investing money may be the only way, as a teacher, that I'll be able to come up with the necessary money and this book may be crucial to helping me make wise investment decisions.

Thank you for your time,

Jason

Dear Gail,

I need the book because my investment philosophy/practice of the late 90s was shortsighted. My greedy, short-term focus caused me to lose almost my entire investment portfolio when the markets collapsed after March 2000. Like too many investors, in the late 90s I took all my investments from my steady index & mutual funds and put them into “hot” tech companies. As a result, my portfolio value went from about $340,000 to about $20,000 today. Over $70,000 of my portfolio value was borrowed from my bank and credit cards, since I thought I would not lose in the long run. After all, I reasoned, the stock market has always come back and surpassed the levels it has achieved. So I lost my behind big time. I kept my town home, and have about $100K left to pay on it. I also still have about $50K in debt to my bank and credit card companies.

I have not looked at stocks since the bubble burst. But I got married in July 2004 and my wife and I are now trying to have children. I am in my early 40s and I need to put the past behind me, begin building a sound investment philosophy, and start investing in stocks that reflect good stewardship. I would use this book to help educate and reinforce in myself a sound, sensible stock investment strategy.

Best Regards,

J. Mike

Hi Gail,

I am 62 and have been a "disciple" of Benjamin Graham for many years. My late father, a stockbroker for so long he was grandfathered on every securities exam ever given, was of the “buy quality and hold it” philosophy. He caught a lot of ridicule for that over the years, particularly in the late 60's and early 70's when the market had, yet again, gone through a "discount the hereafter" phase or what was also called the "greater fool" theory.

I have basically followed his philosophy over the years, except for several years when I thought I "knew better." Those years were a mistake.

Regarding the book more specifically, I would use it for my own edification and knowledge expansion. Further, I have several people a few years younger than I who will benefit from the author’s concepts. They are more apt to read than listen to me. :-)

Sincerely,

Matt

Hi Gail:

I would use this book to increase my knowledge for contrarian investing and to maintain discipline during 'out of favor/out of fad' periods. I partially got caught up in the go-go late 90's and although I hit some winners in a hurry, I gave quite a bit back in the end. During the subsequent crunch, my deceased father's voice kept echoing in my mind... "What about the dividends?! Why don't these tech companies pay dividends?!" My father was an amateur investor in his later years but a depression era saver all his 86 years. Interest and dividends were everything! You know the 'old school' type... Cash is King! Mortgage loan? Paid it off in about 5 years. Car loans and credit card interest? NO WAY!!!

So I realigned my portfolio with more dividend payers - including some of his favorites such as REIT's. (Wish I would have kept those railroads! LOL) And since 2000, my portfolio has grown modestly but steadily -- rather than losses like so many.

Sincerely,

Charles

Dear Gail,

I’m 37 with a wife and family of 3. We finally paid off $36,000 in credit cards in five long hard years. I have never invested before and need to start. For my wife, for my kids. While teaching doesn’t pay a lot, and homemakers get paid less, we pay our bills and work hard. Now we need our money to work hard for us.

Thanks for considering us,

Russell

Gail,

I am a stay at home mom with three children ages 8, 6, and 3. My husband works hard outside the home. My contribution to our household budget is to handle the paperwork! I believe that keeping up with the bills/health insurance/dental insurance/home and auto/insurance/investments could almost be a full time job.

I am interested in Professor Siegel's book because I have been concerned about the impact of the baby boomers selling their stocks. I know that some people like to scare investors with this scenario.

Thanks again for your helpful columns.

Beth

Gail:

My small stock portfolio, inherited from my hard-working mom, was released from her estate to me on September 10, 2001. You know what happened to it between her death and now. I'll use Jeremy Siegel's book to help build up a portfolio to supplement my retirement income and to teach my kids to do the same.

Doris

Hi, Gail,

We just had our 8th child. At this point in our lives, our time for researching individual investments is limited and our funds for investing are limited as well (we currently put away about $400 per month). We try to teach our children about saving and money management, and want to include an education about long term investing.

We would appreciate a resource that would give me the information not only to manage our meager assets effectively to meet our long-term goals, but also to give our children the early start that we did not have.

Rose

Gail,

I would like to offer these reasons for a copy of Jeremy Siegel’s book:

1. For the first time in our marriage my wife and I have some extra cash (equity line of credit). We are both perilously close to 50 so we need to act now, and fast.

2. We have looked in the Phoenix valley for real estate to invest in but the prices are now so prohibitive that we cannot afford to buy any decent investment property.

3. Because of career changes and disability we have not been able to follow through with our retirement investment plans. We are just now able to get a foothold on it. This book would help a lot.

Thanks a bunch.

Glenn

Gail,

My wife and I are in our mid 30's and have three daughters under six and we bought our first house five years ago, have a 401(k), Roth and a college plan for the girls. I'd love to read this book and work to maximize these investments to pay for retirement, college and weddings (as well as ballet shoes, piano lessons and little soccer shoes). We think we have a good foundation that we'd like to build upon by applying sound research.

Thank you,

Derek

Gail,

As a loyal follower of Buffett's contrarian approach to investing, I found your summary of Prof. Siegel’s findings encouraging. Americans now have some scholarly research to counteract the human tendencies to pay too much for the latest hot stock.

I will put this book to good use by helping to educate friends and family, many of whom have never taken the time to learn long-term investment strategies, and as a consequence have done poorly with what little investments they have. I can't blame them; most of them have their hands full raising children with both parents working full-time.

As the professional student in the family I hope to contribute in a way that makes their retirement years enjoyable.

Thanks,

Armando

Dear Gail,

I am constantly advised to buy more aggressive stocks since I am in my 30s. I received some stock from my grandparents and I have been reluctant to replace the high dividend stocks with newer tech stocks. I am very interested to read a book by someone who has compared the returns of the “older” companies and the newer, so-called “hot” companies. In fact, I still have some railroad stock!

Jim

Dear Gail,

I have been burned, burned, burned by "hot" growth stocks (read: dotcom, tech, etc.). I took a licking and didn't keep on ticking when the market crashed early this decade. Only recently have I begun to consider getting back in, and coincidental to your column I have been pondering such un-sexy stocks as Wal-Mart and other big companies that pay dividends.

I would love to read Jeremy Siegel's book and the research he has compiled.

Thanks,

Jeff

Ms. Buckner,

As a child of the 50’s, all the talk about Social Security and investing has me reeling. If I could read one book that might make clearer as to what to invest in and how to do it better it would surely make my future easier to handle.

Earnie

Hi Gail,

As an individual investor and also a member of a small investment club I am constantly struggling with how best to pick stocks. I also own several index funds thru a 401(k) I set up for my small business.

I’d like to read Prof. Siegel's new book so I can learn about his refreshing new perspective on investing and share it with my employees and investment club members.

Regards,

Duane

Gail,

I am not a professional investor, just an everyday 30 year old worker who wants to secure his future as best as I can. I take great care with my 401(k) allocations and distributions. I actually developed my own projection for future allocations as I age, so that, on a sliding level, the investments get more secure.

I would love a copy of this book to possibly adjust these numbers, and use the info on my non-retirement portfolio, which I am just starting to establish. A copy of my own would be greatly appreciated.

Matthew

Gail,

HELP! I am in need of solid guidance! My stock picks so far have been mostly losers. Examples:

Ford: Lost $2000

Microsoft: Lost $500

Lucent: Lost $2000

I'm not an active trader but I need a good way to value a stock and make sound buy and sell decisions. I would use the book to make stock picks for long term investments to supplement my IRA and 401(k) type investments.

Norm

Gail,

I’d be the perfect choice to receive the book “The Future for Investors” because I’m just starting to look at investing and haven’t ‘learned’ any bad habits! My wife and I are in our early thirties with four children, the oldest being 10, the youngest 2 ½. I’m an officer in the US Air Force and I haven’t really worried about investing because we’ve been paying down debt (nearly complete!) and I suppose I’ve been ready to rely on my military retirement. As we move closer to having some ‘disposable’ income, I keep thinking about the possibilities of investing. This book (along with your column, of course!) would provide our family the knowledge we need to make a good beginning!

John

Dear Gail,

Since I am a 70-year-old person who has a 401(k), I need this book so that I can retire sooner than later. I want to evaluate the stocks currently in my 401(k) and decide what to keep and what to sell. Thank you,

Don

Hi Gail ,

The reason I would love to read this book is I recently inherited 300 shares of Pepsico and about 60 of Yum Brands and while not a windfall I think it is something to build on. After reading the 2004 company info that came with the proxy statements, I was amazed at how large these companies are and have since signed up for dividend reinvestment with both. This book would hopefully steer me in the right direction on what to look for on future investments.

Thanks for considering me,

Doug

I want to learn more about how valuation matters and how I can best use that information in my own investment planning. I also want to avoid falling into "the growth trap" and it sounds like Professor Siegel's book can aid me immeasurably in working toward that goal.

Steven

Hi Gail,

The timing of your review of Professor Siegel’s book couldn't be better. I recently left a company that had an ESOP and have rolled over my shares to an IRA with many investment options. I am looking for some good, easy to understand, insight on how to best protect and grow this money.

Bye,

Detlef

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