Most individual stocks lose money; a few pay for everything
The claim
The majority of individual stocks underperform Treasury bills over their lifetimes, and aggregate stock market wealth creation traces to a small minority of firms.
Why we rate it strong
Computed directly from the full CRSP universe over nine decades, and replicated on global data.
Bessembinder examined every US common stock from 1926 onward. The median stock's lifetime return underperformed one-month Treasury bills. Slightly over four percent of listed companies accounted for the entire net wealth creation of the US stock market above T-bills; the other ninety-six percent, collectively, matched cash.
This is not a paradox. Stock returns are extremely right-skewed: losses are capped at 100% while gains are unbounded, so a small number of enormous winners drag the mean far above the median. The market goes up because of a handful of companies, and there is no reliable way to know in advance which handful.
The practical implication is sharper than the usual 'don't put all your eggs in one basket'. A concentrated portfolio does not merely have higher variance around the same expected return — its most likely outcome is meaningfully worse than the market, because it will probably miss the few names that mattered. Owning the whole market guarantees you own the winners. It is the only strategy that does.
Where this breaks down
- Skewness cuts both ways for index investors: a market-cap-weighted index gets its return from the same few winners, and is therefore more concentrated than it looks.
- The result is about individual stock selection. It does not imply anything about diversifying across asset classes, which rests on a different argument about correlation.
- Bessembinder's finding is computed over full company lifetimes. Shorter holding periods change the distribution.
Sources
Follow these rather than taking our word for the summary.
Hendrik Bessembinder (2018). Do Stocks Outperform Treasury Bills?
Journal of Financial Economics, 129(3), 440-457
Finding: The median US stock underperformed one-month T-bills over its life; 4% of firms account for all net market wealth creation.
Elroy Dimson, Paul Marsh and Mike Staunton (2024). Global Investment Returns Yearbook
UBS / London Business School, annual since 2000
Finding: Long-run equity returns vary widely across 20+ national markets; the US was among the strongest, making US-only data an optimistic base case.