A Minority of Stocks Are Responsible for the Majority of the Market’s Gains

Here is an interesting chart that shows the expectancy of returns for individual stocks.  Given the historically upward trend of Indices, the data isn't as favorable as I assumed.


151129 Return Expectancy of Individual Stocks

via ValueWalk.

Here are some key take-aways:

  • The mean compounded annual return for all issues was negative.  
  • About two-thirds of all stocks had a compounded annual return of less than 10%.
  • Moreover, 39% of all stocks had a negative lifetime total return. 

It points to the importance of risk control, sensible diversification, and the ability to ride your winners.  Wait, that is the foundation of successful investing … isn't it?

Note:  The data for the chart covers all common stocks that traded on the NYSE, AMEX, and NASDAQ since 1983, including delisted stocks, with a few filters.

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