MW This study will tell you everything you need to know about how to be a successful investor
By Gordon Gottsegen
The majority of the stock market's gains come from a minority of stocks, and time in the market beats timing the market
Investors are better off investing in the stock market over a long time horizon.
Hendrik Bessembinder, a finance professor at Arizona State University, recently published the latest update to his academic research examining the past 100 years of U.S. stock-market performance. His two key findings: The stock market is incredible at generating wealth for its shareholders, but those returns come from relatively few companies.
Understanding what this means can teach people an important lesson about investing.
His paper, titled "One Hundred Years in the U.S. Stock Markets," looked at almost 30,000 stocks that were issued between January 1926 and December 2025. It measured the performance of those stocks by looking at the "buy-and-hold" return, which calculates how much one dollar invested in the stock would return, and by measuring the total wealth generated for shareholders in aggregate and comparing that to hypothetical returns if that capital had been invested in one-month Treasury bills BX:TMUBMUSD01M instead.
The paper found that the best "buy-and-hold" stocks were mostly stocks that had been around for most, if not all, of those 100 years, due to the power of compounding returns. The top company in terms of cumulative return was tobacco giant Altria Group $(MO)$, which was previously known as Philip Morris. Vulcan Materials $(VMC)$ was the No. 2 company, while other blue-chip companies like International Business Machines $(IBM)$, General Dynamics (GD), Eaton $(ETN)$ and Boeing $(BA)$ also topped the list.
But there was a bit of selection bias in this list. The paper found that those nearly 30,000 companies only averaged 11.7 years on the market, due to delistings, mergers and acquisitions. So it's quite rare for a stock to stick around for 100 years.
On top of that, the median "buy-and-hold" return was -6.87%, meaning the median company actually lost money for its shareholders. Only 48.22% of these stocks generated a positive return, and only 41.17% returned more than investing in one-month Treasurys would have done. And when aggregating a value-weighted portfolio of all common stocks over this 100-year time frame and calculating their performance, only 27.60% of stocks beat the market.
This shows that most of the U.S. stock market's returns are due to a relatively small number of "winners."
"The most important new finding in my paper (and my prior related papers) is the strong concentration of performance, or positive skewness, across stocks. This implies that the market risk premium is attributable to a relatively few high-performing stocks (not due to the typical stock)," Bessembinder wrote in an email to MarketWatch.
How this should inform your investing
Cullen Roche is the founder and chief investment officer of Discipline Funds, a financial-advisory firm, and the author of several investing books, including "Your Perfect Portfolio." Roche said he used Bessembinder's academic research to inform a significant portion of his book.
"The Bessembinder paper is really interesting because it communicates pretty clearly that the stock market is, especially in the short term, like a lottery," Roche said. "It's a lot like gambling, and if you think about it over the short term, you should expect gambling-type results."
However, over the long term, the odds become more favorable.
"As a 10- or 20-year instrument, you substantially increase your probabilities of having a positive-sum outcome, in large part because you're allowing the instruments to accrue the returns that they're designed to accrue over time," Roche said.
As the cliché goes, time in the market beats timing the market. But in order to outperform in the long run, investors have to somehow gain exposure to those few winning stocks.
This is possible through diversification. Spreading your equity portfolio across sectors and a variety of factors can help improve the odds of capturing gains when the outlier stocks start outperforming.
Roche said that investors can use index funds as another strategy to capture these gains.
"Index funds are really beautiful because they operate with a momentum process. They're weeding out poor performers over time because they fall out of the index, and they're being replaced with firms that then have momentum-like characteristics," Roche said.
This rebalancing process helps index-fund investors automate portfolio construction in a way that helps capture the momentum of stock-market winners.
Also read: What are the most profitable stocks of all time? The answer might surprise you.
Another big takeaway from the Bessembinder paper is that stock-market performance has become a lot more concentrated in recent years, with fewer stocks accounting for the stock market's total gain.
This means that it's becoming harder to pick stocks that will beat the market, but the stocks that do beat the market see pretty substantial gains.
To beat the market, Bessembinder said that it's not enough for investors to be smart or have skill. They also have to be better than the smartest investors they're competing with. But by definition, most investors can't be better than average.
"For them, my papers reinforce the desirability of broad diversification - narrow portfolios selected in the absence of such skill have a high likelihood of underperforming the market," Bessembinder told MarketWatch.
But he admits that won't stop people from trying to beat the market.
"For the relative few who have the right comparative advantage, the findings show how large the upside can be and support taking relatively large positions in relatively few stocks. But smart traders should keep in mind the potential for overconfidence in one's abilities," he said.
-Gordon Gottsegen
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April 14, 2026 12:03 ET (16:03 GMT)
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