Before we get into today’s episode, I just want to extend a big thank you to everyone who has recently left a written review on Apple Podcasts or given the show a star rating on Spotify.

A quick shout out to HappyCOListener, 1971guy, Elizabeth G, Carlos, MikeBinNC, SPFlistenr, and jjaarons, just to name a few.

I sincerely appreciate the kind words. Your feedback directly helps shape the topics I cover and motivates me to keep working on making the show better. So, if you’re enjoying the podcast and haven’t yet left a quick written review on Apple Podcasts or a star rating on Spotify, I’d be incredibly grateful if you did.

Thank you again for the continued support. And now, onto today’s episode.

Why 59% of Stocks Destroy Wealth (And What Smart Retirees Do About It)

Last week, well-known finance professor Hank Bessembinder published a new paper titled One Hundred Years in the U.S. Stock Markets. If his name sounds familiar, it may be because I referenced another paper of his that got a lot of attention in the financial world in an episode last year. The title of it posed a provocative question: Do Stocks Outperform Treasury Bills?

That earlier paper used data through 2016 and covered roughly 25,000 companies. And the conclusion, as I shared in that episode, was striking: most individual stocks did not outperform Treasury bills. You heard that correctly: most individual stocks have not outperformed Treasury bills.

For anyone unfamiliar, Treasury bills, or T-bills, are essentially a cash equivalent. They’re considered one of the safest places to park cash, which is why they’re often used as a benchmark for what investors could have earned without really taking any risk In fact, if you own a government money market fund in your investment account, there’s a good chance T-bills make up a healthy portion of it.

So, to recap, after analyzing 25,000 companies from 1926 to 2016, Bessebinder found in his earlier paper that the majority of stocks underperformed cash.

His new study, the one I’m sharing with you today, updates and extends that original analysis through the end of 2025, finally giving us a full century of data. It now includes nearly 30,000 stocks issued by more than 29,000 companies, and the updated findings are even more striking.

So let’s walk through what he found. We’ll start with why the stock market has been one of the greatest wealth-building machines in history, then I’ll share the one incredible statistic from this study that I think should change how everyone thinks about investing in stocks, and then we’ll wrap up with what this all means for your retirement plan and three things you can do to take action.

Ok, let’s start with the headline numbers, because they’re remarkable. Over the last 100 years, the overall U.S. stock market returned about 10% per year. Probably not very surprising—since that’s the number you regularly hear quoted in the media and in investing books. But what does that actually mean in real life? It means that $1 invested in the broad U.S. stock market in January of 1926 would have grown to more than $15,000 by the end of 2025.

By comparison, that same $1 invested in Treasury bills would have grown to only about $25 over that same time period. So $15,000 versus $25. That’s the benefit of taking some risk with your investments and staying the course. No risk, no reward.

But here’s the important part: that 10% return is the return of the overall market. It’s the collective result of owning everything. It’s the return you got by owning every stock in the U.S. market. When you zoom in and evaluate each of the individual stocks instead, the story starts to look very different.

Now, to be extra clear and avoid any confusion, that 10% annualized return I just mentioned, the one that turned a dollar into $15,000, that’s the return you earned by owning the entire market together as one portfolio. Every stock, weighted by size, working collectively. The numbers I’m about to share are different. These are the returns of each individual stock measured on its own.

So, according to the study, the average return across all individual U.S. stocks measured was over 30,000%. That sounds pretty incredible, right? Yes, but the median return, the one right in the middle, was negative 7%. I’ll say that again. The median return for the nearly 30,000 individual stocks measured over the past century was a negative 7%.

How can the average be so high while the median is negative? It comes down to something called positive skewness. Put simply, it means a small number of huge winners pull the average way up, while the majority of stocks deliver mediocre or negative results.

Think of it this way. If you’re in a room with 99 people who each have $50,000 in savings, and then Elon Musk walks in, the average net worth in that room just skyrockets to billions. But nothing actually changed for anyone else—the median person still has $50,000.

On a more complex level, that’s essentially what happens in the stock market. A relatively small number of extraordinary companies are doing the heavy lifting for the entire market. In fact, according to the study, only about 48% of stocks generated a positive buy-and-hold return over their lifetime. Fewer than half.

Perhaps even crazier, when you compare individual stock returns to Treasury bills over the same time period, only about 41% of stocks beat those extremely safe government bonds. Said another way, if you had randomly picked a single stock and held it for its entire life on the market, there was a nearly 60% chance that you would have been better off just owning Treasury bills.

Now here’s where this gets really interesting. Bessembinder looks at something called shareholder wealth creation—which is essentially how much value a company created beyond what investors could’ve earned just holding Treasury bills.

So, in total, across about 30,000 companies over the last century, that added up to roughly $91 trillion of shareholder wealth. But that wealth was extraordinarily concentrated. In other words, it wasn’t spread evenly… not even close. Apple alone created about $5 trillion of it. Add Nvidia and Microsoft, and just those three companies account for roughly 15% of all the wealth the entire U.S. stock market has ever generated. The top five companies, adds Google and Amazon to the mix? Those top five created over 21% of all wealth.

And perhaps the most jaw-dropping statistic in the entire study: Just 46 companies, out of nearly 30,000, created half of all the wealth in the U.S. stock market over the past 100 years.

I’ll say that again: just 46 companies out of nearly 30,000 accounted for half of all the net wealth created in the U.S. stock market over the past century.

Now, if that feels hard to wrap your head around, here’s another way to think about it. If you lined up every stock measured in the study from worst performer to best… the bottom 59%—roughly 17,000 companies—the bottom 59% actually destroyed wealth. In other words, investors would’ve been better off in Treasury bills than investing in those 17,000 stocks.

And it doesn’t stop there. The next 37% of companies—nearly 11,000 more stocks—broke even with treasury bills. So when you put those two groups together, this means that more than 28,000 stocks over the last 100 years either experienced negative returns or barely kept up with cash-like T-bills.

That leaves just over 1,000 companies—about 3.7% of the total market—that created all $91 trillion of net shareholder wealth over the past century.

And the trend hasn’t changed in more recent years. In fact, wealth creation has become even more concentrated since his last paper. Back when Bessembinder studied data through 2016, it took 89 companies to account for half of all net wealth creation. In this updated study, which extends through 2025, it only took 46. Only 46 companies.

From 2017 to 2025 alone, Nvidia generated $4.5 trillion in shareholder wealth. Apple added another $4.1 trillion. Microsoft $3.3 trillion. These numbers dwarf what these same companies had generated in all prior years combined. And get this: 19 of the top 30 wealth-creating companies over the past 8 years weren’t even on the top 30 list through 2016. Companies like Nvidia, Tesla, Meta, and Eli Lilly came seemingly out of nowhere to become dominant wealth creators.

Now, in his most recent paper, Bessembinder raises an interesting and timely question that I think is worth sharing. He asks whether artificial intelligence will accelerate this winner-take-all dynamic, where a few dominant companies capture most of the gains, or whether widespread adoption of AI will actually level the playing field and allow a larger number of specialized companies to thrive.

Nobody knows the answer of course, but the question itself is a good reminder that the future is inherently uncertain, and the companies leading the market ten years from now might not even be on your radar today. Before we get into what this means for your retirement portfolio and discuss three actions you can take right now, I want to highlight one more finding from the study because I think it’s fascinating.

So, in his research, Bessembinder looked at the 30 stocks with the highest cumulative returns over the last century. Number one on the list was Altria Group, formerly Philip Morris.

And get this – just one dollar invested in Altria in 1926 would have grown to more than $4.4 million by the end of 2025. One dollar turned into more than $4 million…insane… almost unbelievable actually. But here’s what’s perhaps even more interesting: Altria’s annualized return was only 16.5% per year. Yes, that’s strong, but it’s not some otherworldly number, it’s just 6.5% higher than the long-term return average of the U.S. stock market.

What this highlights is that the real magic was not just the return itself—it was that it compounded at that rate for a full century. To see how powerful that is, look at the second-best stock on the list: Vulcan Materials, which compounded at about 14% per year since 1926. Now, 16.5% versus 14% does not sound like a huge difference, but over 100 years, that gap became enormous.

Specifically, a single dollar invested in Vulcan grew to a little over $500,000, compared to $4.4M in Altria stock. So even though the annual return difference was only a couple of percentage points, Altria’s ending value was almost nine times larger. That is the power of compounding. Small differences in annual returns can lead to massive differences in outcomes when they play out over long periods of time.

And maybe you’re sitting there wondering: but, what about the stocks that had the highest annual returns? Haven’t there been companies that earned far more than 16.5% a year?

Yes, but over shorter time periods. And that’s the point. Many of the stocks with the highest annualized returns over 5, 10, or even 20+ years did not show up on the list of highest cumulative returns over the full century. In other words, the eye-popping annual winners your neighbor or co-worker loves to tell you about rarely stay on top long enough to dominate over truly long periods of time.

Which brings us back to an old investing saying because, in this case, the data really does support it: It’s not about timing the market. It’s about time in the market.

So we’ve covered a lot of data. Now let’s bring it back to what this means for you as a retirement saver.

1.) First, and probably most obvious, this study makes an incredibly strong case for broad diversification through low-cost index funds. If nearly 60% of individual stocks have reduced shareholder wealth, and fewer than 4% of companies created all of the market’s net gains, I hope it’s clear to everyone that the odds of consistently picking the right stocks are incredibly low.

And it’s not just individual investors who struggle with this. Even professional stock pickers have a hard time. In fact, the data shows that only about 28% of stocks outperformed the overall market over their lifetimes. Think about that. Roughly three out of every four stocks underperformed a simple index fund. But when you own the entire market through a diversified mix of index funds, you make sure you own all of the big winners. You own the Apples, the Nvidias, the Microsofts, and the next generation of companies that will drive returns in the future, including the ones nobody can identify yet.

2.) Second, the research and statistics shared today hopefully help explain why stock picking and concentrated portfolios can be especially dangerous in retirement. If you’re still working and adding to your accounts, you may have time to recover from a bad investment decision. But in retirement, the stakes are different. A concentrated bet that goes wrong can do real long-term damage when you’re relying on your portfolio to generate income or fund other retirement goals.

In case what I’ve shared so far isn’t convincing enough, it’s worth adding that 40% of companies in the Russell 3000, which represents about 98% of the entire U.S. equity market, 40% of companies in the Russell 3000 have lost at least 70% of their value and never recovered. Four out of every 10 publicly traded companies have never recovered. That is not the side of the data you want to end up on in retirement.

3.) Lastly, while this study focuses only on U.S. stocks, I think it also serves as a good reminder that international diversification matters. A small group of U.S. mega-cap tech companies has driven a huge share of returns over the last decade. But market leadership doesn’t stay the same forever—the winners of one era are often not the winners of the next. And we may already be seeing some of that begin to shift, with international stocks, as well as a few other asset classes, showing renewed strength relative to U.S. stocks over the last year and a half or so. That’s why owning stocks across global markets matters. It gives you exposure to wherever the next wave of wealth creation happens to come from. And to me, that’s really the bigger lesson in all of this: Successful investing is less about trying to identify the next big winner ahead of time, and more about making sure you don’t miss it when it shows up.

So, with all of that, let me wrap this up by sharing three practical takeaways you can put to use right away.

Number one: if you own individual stocks, especially a concentrated position in a single company, let this study be a reason to take a hard look at whether that still makes sense for your retirement plan. And yes, that includes employer stock. The data is pretty clear: when a large portion of your wealth is tied up in just a few companies, the odds are not in your favor.

Number two: resist the urge to chase recent winners. Nineteen of the top 30 wealth-creating companies over the last decade were not in the top 30 over the prior 90 years. In other words, the market’s biggest future winners are probably not the names everyone is talking about today. So how do you make sure you own them? Own the entire market.

Now, owning the entire market through simple, market-cap-weighted index funds (like a Vanguard total market fund) is a perfectly acceptable approach. But it’s worth highlighting that there are, in my opinion at least, better ways to own the entire market while being more intentional about how you own it.

For example, you can use evidence and academic research to tilt or overweight a portfolio toward characteristics that have historically been associated with higher expected returns—things like smaller companies, value-oriented companies, and companies with higher profitability. Said another way, you’re still buying the entire haystack, but you’re owning a little more of the parts that the evidence suggests are likely to reward you over time.

And this approach, sometimes referred to as factor investing, is not just about better returns. A traditional S&P 500 index fund today is heavily concentrated in a handful of mega-cap tech stocks. Tilting toward other areas of the market naturally spreads your exposure more broadly, which can reduce concentration risk and provide a smoother ride, especially during periods when the largest companies underperform.

Lastly, number three: remember that time is one of your greatest investing assets. The companies with the biggest cumulative returns in this study were not always the flashiest. Many were simply businesses that compounded at solid rates for a very long time. That’s how wealth is built. And if you’re in your 50s or 60s, it’s worth remembering that you may still have a 20, 30, or even 40+ year investing horizon ahead of you. So stay patient, stay diversified, and let evidence and compounding do what it does best.

I’ve linked to the full Bessembinder study in today’s show notes, as well as the paper from 2018, if you’re having trouble sleeping at night and want to explore the data yourself. It’s definitely academic and a bit dense in places, but even just skimming the tables may be something you find interesting.

And if this episode has you thinking about your own portfolio and whether it’s positioned appropriately for retirement, my team and I would be honored to have a conversation. You can click the “Work With Me” button on the Stay Wealthy website, or use the link in the episode description in your podcast app to learn more about our 4-step process and book a call.

Thank you as always for listening, and once again, to view the research and resources supporting today’s episode, just head over to youstaywealthy.com/276.