Stocks are risky.
1-month Treasury bills are risk-free.
They are backed by the full faith and credit of the U.S. Treasury.
A finance professor made this stunning discovery.
Only 4% of the total number of stocks (1,092 stocks out of a total of 25,967) accounted for the net gain for the entire US stock market since 1926.
The other 96% of firms that issued stock collectively matched 1-month Treasury bill returns over their lifetimes.
Investors who bought those stocks took on additional risk, for no reward.
This study supports the importance of broad diversification, using low-cost index funds.
It’s the only way to be sure your portfolio includes stock “winners.”