Common Stocks As Long Term Investments

Edgar Lawrence Smith, was an economist, investment manager and author of the influential book "Common Stocks as Long Term Investments", which promoted the then-surprising idea that stocks excel bonds in long-term yield. He worked in banking and other financial endeavors in the years after college, then signed as an adviser to the brokerage firm Low, Dixon & Company. While there, he later recounted in his Harvard class's 50th reunion yearbook, "I tried to write a pamphlet on why bonds were the best form of long term investment. But supporting evidence for this thesis could not be found." This discovery led to the publication of "Common Stocks as Long Term Investments." The book was widely reviewed and praised, and became a key intellectual support for the stock market boom. Its success enabled Smith to launch a mutual fund firm, "Investment Managers Company." It also garnered him an invitation from the economist John Maynard Keynes, who had favorably reviewed the book in "The Nation", to join the Royal Economic Society.

This book was mentioned by Warren Buffett in the 2019 Berkshire Hathaway Annual Letter to Shareholders. Its key thesis is that even though (or maybe because) many people view common stocks as speculative and avoid them in favor of high grade bonds, common stocks have outperformed bonds over the long term.