If not for concerns about Europe, the U.S. stock market would be 20 percent to 25 percent higher, Jeremy Siegel, economics professor at the University of Pennsylvania's Wharton School told CNBC Thursday.
"We're all waiting. Will there be a Lehman-type event? But I don't think so, because the European Central Bank knows, reluctantly, it will do what it has to do before we get to that stage," he said.
In the meantime, European stocks are incredibly cheap, at eight to nine times earrings they're "25 percent cheaper than U.S. stocks, which are cheap," Siegel said.
So how does he invest? "I love dividend-paying stocks. I have always loved them. I’ve fallen more in love with them now," Siegel said. In his other job as senior investment strategy adviser at Wisdom Tree Investments, he buys these stocks through the company's exchange-traded funds across a broad spectrum of sectors and countries.
"I like to diversify. I’ve never been much of a stock picker," he explained. "Emerging markets are cheap. Europe has a 6.5 percent yield, if you stick with the dividend payers, the U.S. has a 3.5 percent yield."
Seigel — who said he's been a market bull for a long time, except for a brief time during the tech bubble of 2000 — said stocks have become a better investment for those seeking long-term income than bonds, commodities, or gold.
"I look at my money fund, it’s pitiful. We all do," he said. When it comes to stocks, "people watch every day. If they go up or down they get all upset. If they buy bonds for income, oh yeah, they’re up and down, I don’t care. Now you can buy stocks for income, for twice the income [as bonds], and they can still get upset if [the stocks] go up and down."
He said the chief buyers of gold are those who fear hyperinflation — too much money being printed by the Federal Reserve — and a financial collapse.
Does he want to own gold? "No," Siegel said. "Five years from now, people will go back and say, you know what, I could've done a lot better than gold."
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Professor Siegel owns ETFs across a variety of sectors through Wisdom Tree but did not name them.