Why Diversification Matters More Than You Think

When investors think of the stock market, they often imagine a sea of opportunity—where every company has the potential to grow and deliver strong returns. But the data tells a different story. According to academic research, most individual stocks underperform the market over their lifetimes, and many fail to outperform even conservative investments like Treasury bills.

The Data Behind the Headlines

A study titled “Do Stocks Outperform Treasury Bills?” by Hendrik Bessembinder, a professor at Arizona State University, analyzed nearly 90 years of U.S. stock market history. His findings were eye-opening:

• Only about 42% of individual U.S. stocks had lifetime returns greater than one-month Treasury bills.

• More than half of all stocks delivered negative lifetime returns.

• A small subset of stocks—about 4%—generated the entire net gain of the U.S. stock market between 1926 and 2016.

In other words, while the overall stock market has grown significantly over the long term, that performance has been driven by a very small number of exceptional companies.

What This Means for Investors

These findings have important implications for long-term investors:

• Stock picking is inherently risky. Even well-known companies can underperform over time.

• Diversification is key. Holding a broad mix of stocks—typically through low-cost index funds or diversified portfolios—can help reduce the risk of owning underperformers.

• Staying invested matters. Because market returns are often concentrated in a few companies and unpredictable in timing, attempting to time the market or chase individual winners can be a costly strategy.

A Disciplined Approach Wins

Rather than trying to guess which companies will outperform, many investors are better served by a goals-based investment strategy focused on diversification, long-term discipline, and regular portfolio reviews.

Working with a fiduciary advisor can help ensure that your investment strategy remains aligned with your financial goals and risk tolerance—especially in a market where the majority of individual stocks may not deliver the returns investors hope for.

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About Rigden Capital Strategies

Rigden Capital Strategies was born out of a simple but powerful idea: financial advice should be personal, transparent, and built around your goals—not generic solutions or product-driven sales. Fueled by decades of experience and a desire to see clients truly succeed, we’ve created a process rooted in value, integrity, and progress.

As a fee-only fiduciary, we offer dynamic, stress-tested wealth plans tailored to your life. Our expertise spans investment management, retirement and tax planning, and estate guidance—blending active and passive strategies to help your portfolio through any market. We believe in real relationships, clear strategies, and long-term results.

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Disclosures:This content is for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. All investing involves risk, including the potential loss of principal. References to specific academic studies are for illustrative purposes and do not constitute an endorsement. Rigden Capital Strategies is a Registered Investment Advisor. For more information about our firm, please visit www.rigdencapital.com.