Over the past century, the American stock market has become one of the greatest wealth creation machines in history.
According to new research by Hendrik Bessembinder, the total buy-and-hold return from US stocks between January 1926 and December 2025 was 1,504,057%.
That isn’t a typo. Just $1 invested across the whole market became worth more than $15,000. And yet the typical individual stock didn’t make investors rich – it lost money.
That’s the paradox of long-term investing: the market works wonderfully while most of its parts do not.
The few stocks that matter
Bessembinder’s paper, One Hundred Years in the U.S. Stock Markets, examined 29,754 stocks listed on US exchanges over the past 100 years. It’s one of the most complete studies ever produced on what actually drives equity returns.
The headline finding is uncomfortable for anyone who believes successful investing is mostly about picking stocks:
• The median individual stock delivered a lifetime buy-and-hold return of -6.9%
• Only 48% of stocks generated any positive return at all
• Only 41% beat Treasury bills, America’s version of cash
• Fewer than 28% beat the market index
So, if you had picked US stocks at random over the past century, you were more likely to lose money than make it.
This sounds odd until you remember how stock market maths works. A share can only fall by 100% (company goes bust), but it can rise by 1,000%, 10,000% or more.
That makes equity returns wildly lopsided. A small number of extraordinary winners pull the market upwards while thousands of ordinary or failed companies quietly disappear.
Bessembinder found that just 3.72% of firms accounted for all $91 trillion of net shareholder wealth created in US stocks over the century. The rest, taken together, didn’t create wealth above cash – they destroyed it.
The very top is even more concentrated, with Apple and Nvidia alone accounting for more than 10% of all wealth created in US stock market history. Add Microsoft, Alphabet and Amazon, and the top five represent 21% of the total.
The future is even harder to pick
The really striking part is that the concentration is getting worse.
Between 2017 and 2025, US markets created $48.36 trillion of net shareholder wealth – more than in the previous 90 years combined. However, the top 30 firms accounted for 61% of those gains, compared with 31% up to 2016.
Many of the biggest recent winners weren’t obvious in advance either. Of the top 30 wealth creators from 2017 to 2025, including Nvidia, Tesla, Meta, Eli Lilly and AMD, 19 weren’t on the top 30 list through 2016. I remember Nvidia as a small graphics card company for games consoles back when I worked in video games in the mid 2000s - Nvidia today I barely recognise.
That’s the problem with stock-picking. It isn’t enough to know that a few companies will create most of the wealth – you have to know which ones, before everyone else does, and then hold them through every wobble, disappointment and valuation panic along the way.
The cost of pretending otherwise
Bessembinder isn't making an argument about active versus passive investing. My own view, however, is that most actively managed funds are trying to do precisely what a century of evidence says is brutally hard: find the few winners, avoid the many losers and do so after charging higher fees.
Those fees look small year by year. Over decades, they are anything but.
Take a £500,000 portfolio earning an assumed 8% a year before charges.
• An actively managed route costing 1.25% a year would grow to about £1.85m after 20 years and £3.55m after 30 years.
• A low-cost index route costing 0.15% would grow to about £2.27m after 20 years and £4.83m after 30 years.
The difference is £421,000 more in your pocket after 20 years and £1.28m after 30 years!
That’s not a rounding error. It’s a house. In many parts of Britain, several houses, actually.
So, you have to be really very certain that the active manager’s performance is going to be much better than the index for the maths to remotely add up for you.
The compounding arithmetic doesn’t care whether a fee sounds reasonable. It only cares that the fee is deducted every year – in good markets and bad – before the investor gets what is left.
Own the haystack
The stock market has been a magnificent wealth creator, but it hasn’t rewarded most individual stocks or most heroic forecasts.
The lesson from 100 years of data is to own more, pay less and let the few great companies do their work for you.
If a tiny minority of companies create almost all long-term wealth, then broad ownership is how investors make sure they actually capture the winners.
At Prosper, this is exactly the philosophy we were built around. Investors should have direct access to broad, low-cost portfolios and see every fee clearly.
Capital at risk. The value of investments can go down as well as up and you may get back less than you invest.
This article is for informational purposes only and does not constitute personal financial advice. The fee examples are illustrative projections based on a constant assumed gross return of 8% a year, with charges deducted annually. Real outcomes will differ depending on market conditions, investment performance and the total costs of any specific product. If you are unsure whether an investment is right for you, please seek regulated financial advice.