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Jeremy James Siegel (born November 14, 1945) is an American economist who is the Russell E. Palmer Professor Emeritus of Finance at the Wharton School of the University of Pennsylvania. He appears regularly on networks including CNN, CNBC and NPR, and writes regular columns for Kiplinger's Personal Finance and Yahoo! Finance. Siegel's paradox is named after him.
He recommends against holding bonds, arguing their long-term performance tends to be negative after inflation. Siegel's position on bonds has been disputed, with critics proposing his data is flawed due to use of unreliable information from earlier sources.Mcquarrie, Edward F.. "Stocks for the Long Run? Sometimes Yes. Sometimes No." ERN: Other Microeconomics: General Equilibrium & Disequilibrium Models of Financial Markets (Topic) (2021): n. pag. McQuarrie, Edward F., The US Bond Market before 1926: Investor Total Return from 1793, Comparing Federal, Municipal and Corporate Bonds Part II: 1857 to 1926 (September 12, 2019).
For stocks, Siegel recommends relying primarily or exclusively on index funds when possible, as active management tends to underperform market averages over long periods. (When he wrote in the late 1990s and early 2000s, index funds were not necessarily available in 401k plans but have become more popular since then.) He is not opposed to holding a small portion of the portfolio in single stocks, provided their selection is prudent.
For all stocks or investment options, Siegel advise following a "D-I-V" mnemonic as a guideline: prioritizing dividends, international, and valuation. His research found dividend-paying stocks tend to offer superior long-term performance, as they are associated with profitable mature companies that hold up well during declining markets and , and are also more likely to be reasonably valued. He has endorsed the Dogs of the Dow method, of holding the highest-dividend stocks in the Dow Jones Industrial Average. Siegel recommends substantial international stock holdings, up to 40-50%, to avoid home country bias and obtain a broader variety of options. For valuation, Siegel recommends stocks or indexes that are fairly valued or undervalued while avoiding sectors that are overvalued or trendy, as they tend to offer poor long-term results. He calls this phenomenon the "growth trap" and notes that fast-growing companies, industries or economies are not necessarily good investments.
Siegel's academic research showing dividend-paying companies tend to offer superior long-term performance with lower risk has influenced the construction of indexes used for WisdomTree Investments, a provider of exchange traded funds.Jeremy Schwartz (2020). The Dividends of a Dividend Approach. Wisdom Tree Research After the dot com bubble of the late 1990s and early 2000s Siegel became somewhat skeptical of the prevailing use of market capitalization for constructing index funds, and thus helped develop fundamental indexing.
"Seven percent per year average real returns on stocks is what I find over nearly two centuries. I don't see persuasive reasons why it should be any different from that over the intermediate run. In the short run, it could be almost anything."That being said, Professor Siegel was correct when he also stated in the same interview:
"I have voiced my concern about the technology sector, and I sometimes advise people to shade down from that sector relative to its percentage in the Standard I really am concerned with these companies that have p-e ratios of 90, 100, and above. I still think stocks, as a diversified portfolio, are the best long-run investment. I will say that indexed bonds at 4% are an attractive hedge at the present time. To get a 4% real rate of return, although it's not as high as 6.5% to 7% that we talked about in stocks, as a guaranteed rate of return is certainly comforting against any inflation."On March 14, 2000, The Wall Street Journal published an opinion piece by Siegel titled: "Big-Cap Tech Stocks Are a Sucker bet". The piece issued warnings against investing in some of the hottest technology stocks during the dot com bubble.Siegel, Jeremy J. (2000). Big-Cap Tech Stocks Are a Sucker's Bet". The Wall Street Journal, accessed 27 November 2021 (paywall).
2002: Lindback Award for outstanding university teaching
1996, 2005: Helen Kardon Moss Anvil Award for outstanding MBA teaching
2005: Nicholas Molodovsky Award by the Chartered Financial Analysts Institute to "those individuals who have made outstanding contributions of such significance as to change the direction of the profession and to raise it to higher standards of accomplishment."
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