I wrote the first edition of Stocks for the Long Runwith two goals in mind:
to document the returns on the major classes of financial assets over the
past two centuries and to offer strategies that maximize long-term port-
folio growth. My research definitively showed that over long periods of
time, the returns on equities not only surpassed those on all other finan-
cial assets but were far safer and more predictable than bond returns
when inflation was taken into account. I concluded that stocks were
clearly the asset of choice for investors seeking long-term growth.
I am both honored and flattered by the tremendous reception that
the core ideas of Stocks for the Long Runhave received. Since the publica-
tion of the first edition 13 years ago, I have given hundreds of lectures on
the markets and the economy both in the United States and abroad. I
have listened closely to the questions that audiences pose, and I have
contemplated the many letters, phone calls, and e-mails from readers.
My responses have formed the basis of much of the new material that
has been added to the fourth edition of Stocks for the Long Run.NEW MATERIAL IN THE FOURTH EDITION
The fourth edition not only updates all the data from the third edition,
but it also introduces completely new material on such topics as which
stocks have done well in the long run and what will be the distribution
of world output and equity values in the middle of this century. A whole
new chapter has been added on the history of the firms in the S&P 500
Index, which celebrated its fiftieth anniversary in March 2007.
A recurring theme in this edition of Stocks for the Long Runis that
“growth does not imply return.” This principle can be applied to indi-
vidual stocks, industries, and even countries. I show the superiority of
high-dividend-yield and low-P-E strategies for the stocks in the S&P 500
Index. Sector growth turns out to play only a minor role in determining
returns. These findings support the conclusion that value stocks outper-
form growth stocks in the long run, a phenomenon that has been well
documented in the finance literature.
In the preface to the 2002 edition of Stocks for the Long Run, I wrote,
“Although I still believe that [capitalization-weighted] indexed invest-
ments should constitute the core of every investor’s long-term portfolio,xviiPREFACE
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