Outsized Risks and Rewards Of Investing in Individual Stocks

The idea that over time stocks outperform conservative investments like T-bills is a widely held belief. While this is true in the aggregate, this study shows that Most (58%) of common stocks do not outperform 1-month Treasury Bills http://csinvesting.org/wp-content/uploads/2017/05/Bessembinder-Do-Stocks-Outperform-Treasury-Bills.pdf The only reason the stock market as a whole outperforms T-Bills over time, is that just a few stocks create a dramatically out sized proportion of the returns Study measures listed stocks from 1926 - December 2015; 26,000 stocks appeared in the CRSP database over this time period resulting in $32trillion of shareholder wealth creation. The top 86 performing stocks, less than one-third of one percent of the total, collectively account for over half of the creation. The 1,000 top performing stocks, less than 4% of the total, account for ALL of the wealth creation.