How many stocks do you need to keep up with the Index?
What are the odds that a randomly picked stock beats the index over 10 years? About 50/50, right?
Not so fast. A recent Vanguard paper found that since 1990, only about 25% of US stocks beat the index over the time they were in it. 75% underperformed.
Why?
Losses are capped at 100%, but gains aren’t. Over time, a handful of stocks compound into giant winners and drag the index average up. The typical stock never catches it. Vanguard found just 10 stocks out of 12,500 created over 30% of all the wealth.
What it means for you: fewer stocks means more chance of missing those winners. In my model:
1 stock: a 25% chance of beating the index
30 stocks: about 41%
around 70 stocks just to get near coin-flip odds
That’s before fees, and with no stock-picking skill assumed.
Try it yourself with my interactive tool here.
Approximate model calibrated to Vanguard (2026), “The power of diversification”.
Comments