We’ve officially begun expanding ETF analysis on Stock Unlock.

You can now:

• View a dedicated ETF Scores tab with 1–5 grades
• Break down what’s happening inside the fund
• See expense ratio grading at a glance
• Evaluate whether underlying holdings look cheap or expensive

This is Phase 1, with an ETF screener, portfolio integration, and mobile support coming next.

👉 Explore an example (VTI):
https://stockunlock.com/etfDetails/VTI/insights

Open any ETF and click the Scores tab.

It is common knowledge that only a small minority of stocks drive the long-term returns of the stock market. Despite the warnings about the Magnificent Seven’s dominance being a negative for markets, skewed returns are not new and actually a normal feature of the stock market.

However, many investors get the implications of this wrong. It may be easy to understand that most stocks do not beat the index, but the numbers show that most stocks do not even outperform U.S. Treasury Bills. 

That is hard to comprehend because it is easy to think that investing in stocks guarantees returns in excess of inflation and what cash can yield. 

Reality is harsher than that. That leaves investors with some hard truths, such as these:

• The average stock is actually a loser
• There’s no such thing as buy and hold forever

Let’s dive further into the details:

Brought to you by: Stock Unlock. 

In 2017, professor Hendrik Bessembinder published a study that highlights some extremely important data for individual investors. Bessembinder looked at 26,000 stocks that were publicly traded at some point between 1926 and 2016. Over the 90 years prior to the study, those stocks were responsible for more than $32 trillion of wealth creation. 

• The top 1,000 stocks (less than 4%) were responsible for all the wealth creation in excess of Treasury Bills 
• The top 86 stocks (less than 0.4%) were responsible for half of that wealth creation in excess of Treasury Bills
• The average return of the other 96% of the stocks was the same as a 1-month Treasury Bill 

Bessembinder used the Treasury Bill as a measuring unit because it is often referred to as the risk free rate. At a minimum, investors are supposed to get rewarded with better returns than the risk-free rate in exchange for taking the risk of owning stocks. As the results show, it is not that easy.

The average monthly return on a 1-month T-bill in Bessembinder’s study was 0.38%, which comes out to around 4% annually. This means that the combined return of the rest of the stocks (excluding the top 1,000 performers), was 4% annually. 

In other words, excluding the top 1,000 stocks in the market, investors would have earned the same returns by sitting in risk-free cash.

Even though we knew that much of the stock market returns came from a handful of winners, these are pretty staggering numbers.

Bessembinder updated the numbers again in 2022, and the outcome showed even more concentration at the top. Now, only ~3.5% of stocks were responsible for all the shareholder wealth creation (in excess of T-bills) over those 96 years. 

This makes sense when considering that the Magnificent 7 has driven much of the market returns over the past decade, and why the index is currently only 1-2% away from all-time highs despite big drawdowns in many stocks beneath the surface. 

You Can Still Make Money In Other Stocks

One of the answers is that missing big winners is costly because it means your returns are more likely to be far below market averages.

But it is also important to understand that you do not necessarily have to find a stock among the 4% to make money:

There are plenty of ways to earn great annualized returns in cyclicals and, more broadly, almost any stock even if it does not create long-term value. Cisco (CSCO) is one of the best examples of this. The stock is famously still down from its dot-com bubble high in 2000, but investors who bought at 11-12x earnings in 2012 would have earned 15% compounded annual returns to today.

In some ways, the study is just another reminder that price matters and different investors can have wildly different returns in the same stock depending on the initial valuation. 

This has also been true for other stocks. Since 2000, Walmart’s (WMT) long-term returns have been pretty lackluster. Between mid-2000 and today, the stock has compounded at around 7.5%, and the stock was flat for more than 15 years at some point. However, investors who bought when the stock was at 10-15x earnings (which is was for many years ending in 2015) would have a 6x return on investment today. 

Most Stocks Are Losers, Don’t Take It Personally

Furthermore, one of the more surprising numbers from the study reveals that more than half of stocks deliver negative returns over their lifetimes as publicly traded companies. 

In the original study, Bessembinder found that 50.8% returned less than 0% and that the average lifetime of a stock in the study (meaning how long it lasted as a public company) was 11.6 years. It would be pretty disappointing to own a stock that returns less than 0% over more than a decade, but that is wildly enough reality for a majority of stocks. 

No matter the price you pay or how much research you put in, chances are you will own a loser at some point. Looking at the numbers, it is actually a normal part of investing and not something you should beat yourself up over. 

Understanding that more than half of stocks are losers will help you move on faster. You do not need to change your philosophy or avoid that industry forever. Instead, it is a reminder to think about position sizing and what level of concentration you can have knowing that some stocks will not work out. If you own a loser, it should become a smaller part of the portfolio over time. If you own a true compounder and the price remains fair, it should become a part of the portfolio over time. 

“Buy and Verify” Is The Only Way

I think arguably the most important takeaway relates to the misunderstanding that long-term investors should own every stock for a long time:

Very few stocks deserve a holding period of forever. There is a huge difference in looking for stocks you can own forever versus actually finding a stock that continuously earns a spot in your portfolio. If you find a stock that does this, hold on for dear life. However, investors do not owe loyalty to a stock that does not deserve it.

Even the best investors are ruthless sellers. Buffett earned his best returns in his 1960s era where he held stocks for 3-5 years before moving on. Peter Lynch owned hundreds of stocks at certain points and frequently turned over his portfolio. 

Chances are that only one or two stocks in your portfolio is among “the 4 percenters”, and it requires constant verification to make a company is on the right tracks to become one. Long-term investors should aim to own stocks forever, yes, but very few actually deserve that. 

It is important to clarify that these numbers should not discourage investors. We already knew that there are a bunch of bad companies out there. Any investor with high hurdles for a company to make it into their portfolio will exclude many of these companies that destroy shareholder value over time. That alone should improve returns beyond what T-bills offer. 

Finally, the study reminds us not to marry any positions. Most stocks return less than 0% over their lifetime, which shows that it is normal to pick a loser from time to time. Take a loss and move on if you have to. There are a very limited number of companies that deserve to be held forever, and the only way to track that is to constantly keep them and the people who run them honest.

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