First off, everything below is meant to educate, not offer specific advice. So if you’re unsure how this applies to your personal situation, drop me a line and let’s talk.
Did you know?
👉 *Less than 4% of all U.S. stocks have been responsible for the market’s net gains over the last century.*
That comes from a landmark study by Professor Hendrik Bessembinder of Arizona State University, first published in 2018 and recently updated with data through 2024.
His conclusion? A small number of companies are responsible for nearly all the market’s long-term wealth creation.
To put it plainly: if you randomly picked stocks, the odds of landing on a long-term winner are about as good as rolling a 25-sided die and hoping for one specific number.
📉 In fact, two-thirds of all stocks either underperformed Treasury bills or lost value altogether.
📈 Meanwhile, just 0.33% of stocks generated HALF of all the wealth the U.S. stock market has ever created.
So what’s the takeaway?
Some investors see stats like these and conclude that indexing is the only sensible approach. Just buy the haystack and you’ll own the needles. And yes, there’s logic in that. Indexing gives you exposure to the winners without having to guess who they’ll be.
But here’s where I differ:
✅ I believe in diversification.
✅ But I also believe in customization, tax efficiency, and knowing what I own.
That’s why I like using separately managed accounts (SMAs) in portfolios whenever I can.
With an SMA, I’m not blindly buying everything in the index. I can tilt portfolios toward high-quality companies and avoid the names that don’t meet my standards. In other words, I don’t have to settle for the “junk” in the index just to get exposure to the great names.
It’s a more tactile, intentional relationship with investing, and I believe it leads to better outcomes, especially for investors who care about long-term efficiency and control.
Bottom line?
You don’t need to chase the next big or hyped stock. You don’t need to make perfect stock picks. But you can invest in a way that gives you exposure to the market’s biggest drivers of wealth without owning the entire haystack.
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