Housel: A tiny fraction of outlier stocks drives majority of market returns
Morgan Housel · Morgan Housel: Get Rich, Stay Rich · May 28, 2024 · at 16:42
Morgan Housel explains the power-law distribution of equity returns to justify broad-market passive index investing over stock picking.
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“It's always going to be the case that a very small number of stocks account for the majority of returns. So recently it's been Fang plus Nvidia. If you didn't own those stocks, Fang plus Nvidia over the last decade, your odds of outperforming are very, very low. It's not zero, but it's incredibly hard if you didn't own those few. And even if you look at an index fund that owns a thousand stocks, let's say, You're gonna get the majority of returns from probably fewer than 20 of them, and it's always been like that.”
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