If you'd have put your savings with money manager Jeremy Grantham in 1985, you would have multiplied your money 13 times and beaten 99% of other investors. Grantham is the chief investment strategist for a giant asset management business named GMO, which manages around $100 billion. He cofounded GMO in 1977... and he's made billions for his investors. His core mutual fund has returned almost 11% a year since 1985, trouncing the S&P 500. But to make a even more money from Grantham, don't invest in his mutual fund. Read his quarterly investment updates instead... If you did nothing else but follow the predictions in Grantham's reports, you'd make a new fortune every decade... Grantham's investment reports are the clearest, no-nonsense appraisals of the investment markets you'll find anywhere. They are free and available to the public. And the long-term predictions Grantham makes are legendary in their accuracy. Take the predictions he made 10 years ago, in a report published in July 2000... Grantham predicted large-cap American stocks and tech stocks would be the worst performers. Specifically, he said the S&P would decline 1.8% a year on average for a decade... and be a worse investment than cash. "We've just experienced the greatest bull market in American history," said Grantham. "I'm sure it's going to be followed by the usual consequences." If you had shorted the stock market the day you read this report, you could have made a fortune over the next three years as the technology bubble popped and America fell into recession. Then Grantham advised his readers to buy real estate investment trusts (REITs). REITs are stock market vehicles for buying real estate. Grantham showed that despite the biggest bull market in America's history, REITs were trading at a 25% discount to physical real estate, while physical real estate was trading at fair value. "The REITs are cheap – really, seriously, absolutely cheap," he said. "There are no cranes all over America. The market's in a sweet spot. The bankers aren't lending ridiculously. Real estate is a good solid asset with a good solid return." If you'd followed Grantham's advice then, you would have caught the full real estate boom. Between 1999 and 2007, the benchmark FTSE NAREIT index rose 244%. Grantham did it again in 2007. "It's bubbly time!" he said in his April 2007 report. "The busting of the bubble will be across all countries, and all assets with the probable exception of high grade bonds." In early 2009, at the bottom of the credit crunch, Grantham declared the market was finally "cheap" and said market returns over the next seven years would be "much above the average of the last 15 years." So far, he's right again. So what's Grantham saying right now? Grantham published his forecasts for the next seven years in his most recent letter. (You can read it here, along with all Grantham's archived letters.)

 

Grantham likes emerging-market stocks and bonds, but his favorite investments are high-quality U.S. stocks. These are the stocks with the most dependable businesses, the longest track records, the most cash, and the strongest brand names. The five biggest positions in Grantham's fund right now are Wal-Mart, Microsoft, Google, ExxonMobil, and Pfizer. Good investing, Tom