Consider the longest secular bull market most people today have ever experienced, 1983 through 2007. Blackstar Funds studied all common stocks that traded on the NYSE, AMEX, and Nasdaq during this period, including those delisted.1 They then limited their research universe to the 8,054 stocks that would have qualified for the Russell 3000 at some point
from 1983 through 2007. During this period the Russell 3000, accounting for 98 percent of U.S. stock liquidity, rose nearly 900 percent, yet:
- 39 percent of stocks had a negative total return. (Two out of every five stocks are money-losing investments.)
- 18.5 percent of stocks lost at least 75 percent of their value. (Nearly one out of every five stocks is a really bad investment.)
- 64 percent of stocks underperformed the Russell 3000. (Most stocks can’t keep up with a diversified index.)
- A small minority of stocks significantly outperformed their peers.
Blackstar provides the stark reality supporting the last point: The best-performing 2,000 stocks—25 percent—accounted for all the gains. The worst performing 6,000—75 percent—collectively had a total return of 0 percent.
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