Quotes from Jeremy J. Siegel

The price investors paid for IBM was just too high. Even though the computer giant trumped Standard Oil on growth, Standard Oil trumped IBM on valuation, and valuation determines investor returns.

Investors can take advantage of this mispricing by buying low-cost passively managed portfolios of value stocks or fundamentally weighted indexes that weight each stock by its share of dividends or earnings rather than by its market value.

In fact, for someone in the highest tax bracket, short-term Treasury bills have yielded a negative after-tax real return since 1871, even lower if state and local taxes are taken into account. In contrast, top-bracket taxable investors would have increased their purchasing power in stocks 288-fold over the same period.

The government can put dividends on the same tax basis as capital gains if the tax authorities allow investors to obtain a tax deferral on reinvested dividends until the stock is sold.

Yet one must be aware of the political, institutional, and legal framework in which these returns were generated. The superior performance of stocks over the past two centuries might be explained by the growing dominance of nations committed to free market economics.

Although those who wait long enough will eventually recoup losses on a diversified portfolio of stocks, buying stocks at or below their historical valuation is the best way to guarantee superior returns.

value stocks have actually done better than growth stocks during both bear markets and economic recessions, so it is doubtful this is the answer.

On September 20, 1931, the British government announced that England was going off the gold standard. It would no longer exchange gold for deposits at the Bank of England or for British currency,