Is the "wrong direction" the "right direction" for investors?

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A common lament I hear from investors is that this country is headed "in the wrong direction", which is a euphemism for Socialism.

It's hard to quarrel with the premise. A recent cover story in Newsweek Magazine darkly proclaimed: We Are All Socialists Now. The tag line noted: "In many ways our economy already resembles a European one. As boomers age and spending grows, we will become even more French."

That has to be bad for investors, right?

Not according to a thoughtful study by Weston J. Wellington, Vice President of Dimensional Fund Advisors. He looked at equity returns of socialist leaning countries and compared them to the U.S.

Much maligned France is a representative example of his results. For the thirty-nine year period from January 1, 1970 to December 31, 2008, the equity returns for France were 10.35% compared to 9.12% for the U.S.

The stock markets of other socialist leaning countries like the UK, Canada, Sweden, Norway, Belgium and Denmark all outperformed the U.S.

Don't expect your broker or the financial media to give you this data. They have a vested interest in feeding the flame of fear.

Reliance on these "financial experts" is the reason why the average equity returns for U.S. investors over the last twenty years is a pathetic 1.87%, which is well under the rate of inflation.

But that's another story.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read and The Smartest 401(k) Book You'll Ever Read. His new book, The Smartest Retirement Book You'll Ever Read, will be published in the fall, 2009. Visit his website at Smartestinvestmentbook.com.


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