Some other highlights from the breakfast presentation with Dr. Siegel:
- From 1957 to 2006 the S&P 500 index returned 10.83%
- If you had just kept the original 500 stocks, instead of tracking the index as it changed over time, you would have returned 11.72% (not even factoring tax effects)
- If you separated the 500 stocks into quintiles, the S&P 100 (top quintile based on yield) would have returned 13.80%, with a Beta of 0.94
His findings regarding the top yielding stocks may be partly responsible for his involvement with Wisdom Tree Investments (which specialize in ETFs that are not weighted to market capitalizations, but rather fundamentally with emphasis on earnings and dividends).
He also explained that the reason the S&P500 index (10.83%) lagged the original 500 (11.72%) was because for new constituents to qualify for inclusion into the S&P500 usually meant they had just been on a growth run, and hence are more likely to be in a state of overvaluation upon entry – which would explain the lag.
Dr. Jeremy Siegel is author of Stocks for the Long Run, 4th Edition – ranked one of the top 10 investing books of all time.
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RRSPs: The Definitive Book on Registered Retirement Savings Plans