How to stay invested in US stocks without the tech overweight
A majority of stock market returns can be attributed to a handful of companies, suggests a W. P. Carey finance expert.
In this story published Feb. 19, 2025, on MoneySense:
I often like to cite a study by Hendrik Bessembinder, a professor at Arizona State University's W. P. Carey School of Business. His research suggests that the largest stock market returns come from a very small number of companies, while 96% of stocks historically have delivered returns no better than U.S. Treasury bills, which are considered risk-free assets. For me, it says: Identifying those few big winners in advance is nearly impossible, and the easiest way to ensure you own them is to buy a broad, market-cap weighted index fund with as many stocks as possible. Over time, the best-performing companies will naturally rise to the top, whether that means tech today or another sector in the future. There's no guesswork involved.
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