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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
I spend a lot of time talking with Washington State public employees about what to do with their DCP savings, their IRAs, and the other investment accounts they've built alongside their pension. And one of the most common things I hear is some version of this: "I've got a chunk of my money in a few individual stocks. They've done well. I don't see a reason to change." I get it. When something is working, it feels right. But a recent academic study caught my attention, and the data behind it tells a story that I think every pre-retiree needs to hear. A Century of Data, One Surprising Finding Finance professor Hendrik Bessembinder at Arizona State University recently published a study called One Hundred Years in the U.S. Stock Markets.¹ It covers nearly 30,000 individual stocks over the full century from 1926 to 2025. The headline number is familiar. The overall U.S. stock market returned roughly 10% per year over that period.¹ A dollar invested in the broad market in 1926 would have grown to over $15,000 by the end of 2025.¹ That sounds great. And it is. But when you stop looking at the market as a whole and start looking at individual stocks, the picture changes dramatically. The median return across all nearly 30,000 individual stocks measured was negative 7%.¹ Not positive. Negative. Let that sit for a moment. The Numbers That Should Worry Stock Pickers Only about 48% of stocks generated a positive return over their lifetime.¹ Fewer than half. It gets worse. When you compare individual stock returns to Treasury bills (essentially a cash equivalent), only about 41% of stocks managed to beat that low bar.¹ Said another way, if you had randomly picked a single stock and held it for its entire life, there was roughly a 60% chance you would have been better off just holding cash. And only about 28% of stocks outperformed the overall market.¹ Roughly three out of four stocks trailed what you could have earned in a simple index fund. Bessembinder's earlier study, published in 2018 and covering data through 2016, found similar patterns with a slightly smaller dataset.² The updated research just makes the case even stronger. Where the Wealth Actually Comes From So if most stocks lose, how does the overall market do so well? The answer is concentration. A tiny number of extraordinary companies do the heavy lifting for everyone else. According to the study, just 46 companies (out of nearly 30,000) created half of all the net wealth generated in the U.S. stock market over the past century.¹ And only about 3.7% of all companies accounted for 100% of the market's net gains.¹ The other 96% of stocks collectively just matched Treasury bills. The top five wealth-creating companies alone (Apple, Nvidia, Microsoft, Alphabet, and Amazon) accounted for over 21% of all wealth created.¹ And here is what really struck me. The concentration has gotten more extreme in recent years. In Bessembinder's earlier study using data through 2016, it took 89 companies to account for half of all net wealth creation.² In the updated study through 2025, it only takes 46.¹ What This Means If You're Approaching Retirement If you have a pension and are getting ready to retire, you already have something most investors don't. A pension. That guaranteed income stream provides a foundation that changes the way you can think about your other investments. But it doesn't eliminate the risk of holding a concentrated stock portfolio in your DCP account or your IRA. Here is the concern. When you're still working and contributing to your accounts, a bad stock pick is painful but recoverable. You have time, and you're adding new money. In retirement, the math changes. You're pulling from your portfolio, not adding to it. A concentrated bet that goes wrong can do real, lasting damage to your retirement income plan. A Better Approach This research reinforces something I talk about with clients all the time. Broad diversification through low-cost funds is not a boring strategy. It is how you make sure you own the small handful of companies that will drive the market's returns going forward. Nobody knows which 46 companies will create half the wealth over the next century. We do know that trying to pick them in advance is a bet against the odds. There are also ways to be more intentional about how you own the broad market. Evidence-based strategies allow you to tilt a portfolio toward characteristics that academic research has linked to higher expected returns, like smaller companies, value-oriented companies, and companies with higher profitability. You still own the whole market. You just own a little more of the areas the evidence suggests are likely to reward you over time. This kind of approach can also help reduce the concentration risk that comes with a traditional S&P 500 index fund, which today is heavily weighted toward a handful of mega-cap tech stocks. Three Things Worth Doing If this data has you thinking about your own portfolio, here are a few steps worth considering. First, take an honest look at any individual stock positions you hold. If a large portion of your retirement savings is tied up in just a few companies, the historical odds are not working in your favor. Second, resist the urge to chase whatever is working right now. Nineteen of the top 30 wealth-creating companies from the last nine years were not in the top 30 over the prior 90 years.¹ Tomorrow's biggest winners probably are not today's headlines. Third, remember that time is still on your side. If you're in your 50s, you may have a 30 or 40-year investing horizon ahead of you. The companies with the biggest cumulative returns in this study were not always the flashiest. Many were simply businesses that compounded at solid rates for a very long time. Small differences in annual returns lead to enormous differences in outcomes over decades. Your pension from DRS provides a stable income floor. That is a real advantage. Pairing it with a broadly diversified, evidence-based investment portfolio in your DCP and other accounts is, in my view, the most reliable way to build the retirement you're working toward. Sources
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AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
May 2026
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