How to Own the Top Stocks on the Market: Index Fund Investing
Learn how index fund investing can change the risk equation for your investment portfolio to allow you to own the top stocks on the market.
Everyone wants to find that homerun investment, those top performing stocks that can take your investment portfolio to new heights. If you’ve actively invested anything before, you know the reality of this situation all too well: chasing winners often means living with losers. So how do you actually find the top stocks, and more importantly, how do you find them ahead of time?
In today’s video, I’m diving into the research of Professor Hendrik Bessembinder from Arizona State University, one of the most comprehensive studies on long-term stock performance. By understanding the data, you can make smarter investment decisions and improve your chances of long-term success.
The Reality of Stock Market Investing
Professor Bessembinder studied the performance of 29,000 U.S. stocks since 1925, and what he found might surprise you. More than half—51.6%—of all stocks had negative returns over their lifetime. Essentially, picking an individual stock is no better than flipping a coin.
Think about it: if you randomly choose a stock, you have a 51.6% chance that it will actually lose money. That’s worse than a coin flip! In fact, this is similar to playing blackjack in a casino, where the house has a slight edge over the players. The stock market, in many ways, can feel like gambling—unless you know how to stack the odds in your favor.
The 2.4% That Made All the Difference
Even more shocking, Bessembinder found that just 2.4% of all stocks accounted for the entirety of stock market gains over the last century. That means nearly all the positive returns in the market came from just a tiny fraction of stocks.
Imagine having 40 marbles in a bag, with only one of them being green. That green marble represents the top-performing stocks that drive the market’s success. If you’re handpicking stocks, your chances of selecting that one winning marble are incredibly low—just like your chances of choosing a stock that ends up being a big winner.
How to Increase Your Odds of Success
With these odds, it’s clear that relying on individual stock picking is a tough game to win. But there’s a way to become the “house” in this stock market casino—by investing in index funds.
An index fund is a collection of stocks that mirrors the overall market. Instead of trying to guess which stock will be the next big winner, an index fund ensures you own a piece of all the stocks—including the top 2.4% that drive market growth.
Yes, you’ll also own the 51.6% of stocks that underperform, but history has shown that the winners more than make up for the losers. By investing in an index fund, you capture the long-term growth of the market without the risk of betting on the wrong stock.
Why Index Funds Make Sense
If you’re serious about investing for the long haul, index funds can provide a simple way to own the top stocks and spread out your investing risk. Instead of gambling on which stocks will be winners, index investing allows you to own a wide array of stocks in the market and potentially benefit from its long-term growth.
This approach can also save you time and stress. It can reduce your need to spend time analyzing individual companies, follow earnings reports, or react to daily stock movements. With index investing, you set it, forget it, and let the market work over time.
Final Thoughts
The stock market is full of opportunity, but the odds are stacked against individual stock pickers. Instead of playing a traditionally losing game, focus on trying to become the house. All investing includes risk–this video and blog are not intended to advise the purchase of any stock and all losses or gains incurred in investing are the sole responsibility of the investor.
Links:
- If the Stock Market Crashes While I’m Retired, What do I do?
- 2025 is the Year to Rebalance Your Investments
- Investing in 2025: Simple Strategies with Joseph Hogue of Let’s Talk Money!
- “Which U.S. Stocks Generated the Highest Long-Term Returns?” by Hendrik Bessembinder
- “Do stocks outperform Treasury bills?” Research by Hendrik Bessembinder, Francis J. and Mary B. Labriola, Arizona State University
- “Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks” by Hendrik Bessembinder, Te-Feng Chen, Goeun Choi and K.C. John Wei, Financial Analysts Journal
Disclosures
This media is provided for informational and educational purposes only and does not consider the investment objectives, financial situation, or particular needs of any consumer. Nothing in this program should be construed as investment, legal, or tax advice, nor as a recommendation to buy, sell, or hold any security or to adopt any investment strategy.
The views and opinions expressed are those of the host and any guest, current as of the date of recording, and may change without notice as market, political or economic conditions evolve. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.
Legal & Tax Disclosure
Consumers should consult their own qualified attorney, CPA, or other professional advisor regarding their specific legal and tax situations.
Advisor Disclosures
Alongside, LLC, doing business as Keil Financial Partners, is an SEC-registered investment adviser. Registration does not imply a certain level of skill or expertise. Advisory services are delivered through the Alongside, LLC platform. Keil Financial Partners is independent, not owned or operated by Alongside, LLC.
Additional information about Alongside, LLC – including its services, fees and any material conflicts of interest – can be found at https://adviserinfo.sec.gov/firm/summary/333587 or by requesting Form ADV Part 2A.
The content of this media should not be reproduced or redistributed without the firm’s written consent. Any trademarks or service marks mentioned belong to their respective owners and are used for identification purposes only.
Share:
View/Listen to Retire Today on:
