A Copernican outlook challenges some of the venerable rules of investing. One is that stocks outperform bonds in the long run. This rule deserves to come with an asterisk, says Hendrik Bessembinder of Arizona State University’s W. P. Carey School of Business. Historically, most stocks have done worse than US Treasury bills. That’s allowing for reinvested dividends, capital gains, splits, everything. How is this even possible? Bessembinder examined the returns of all stocks on the NYSE, AMEX, and NASDAQ exchanges from 1926 to 2015. He found that the stock market’s performance is mainly due to a tiny minority of stocks that hit it big and remain successful. The average stock does far worse. The median life of a stock on the three exchanges was barely seven years. The most common return was close to a total loss. If this is hard to believe, it’s because indexes, like the S&P 500 or Dow Jones, do not say much about the typical stock. They are like Eddington’s net, scooping up the bigger fish. All the stocks in the indexes are already winners. The indexes quickly drop companies that have stopped winning, replacing them with new winners.

William Poundstone, The doomsday calculation: How an equation that predicts the future is transforming everything we know about life and the universe, New York, 2019, p. 109