---
title: "Do Stocks Outperform Treasury Bills? Most Individual Shares Do Not"
description: "Do stocks outperform treasury bills? The market does, the typical listed company does not, and the research showing why changes how you size a single holding."
author: "Anna Rosen"
category: "Contrarian Views"
date: 2026-10-22T14:15:12.739Z
canonical: "https://investormuse.com/blog/most-stocks-lose-to-treasury-bills-bessembinder"
---

# Do Stocks Outperform Treasury Bills? Most Individual Shares Do Not

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> Do stocks outperform treasury bills? The market does, the typical listed company does not, and the research showing why changes how you size a single holding.

Do stocks outperform treasury bills? For the market as a whole the answer has been yes for a century. For the typical individual share the answer is no, and the distance between those two sentences is the single most useful thing an investor can understand about picking companies.

## Where the Market's Gain Actually Came From

Hendrik Bessembinder, who teaches finance at Arizona State University, went through the lifetime returns of every common share quoted on Nasdaq, the New York Stock Exchange and the American Stock Exchange since 1926, measuring each one against what a one-month Treasury bill would have paid over the same span. His university's summary of the work reports that 86 companies generated $16 trillion of wealth across roughly ninety years, which is half the total produced by the entire market, and that the thousand strongest account for all of the wealth creation while [the other 96 per cent together merely matched what one-month Treasury bills paid](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills).

The original 1926 to 2016 version of that work is where the famous line comes from: the best-performing 4 per cent of listed companies, [in Bessembinder's own words, explain the net gain for the entire United States stock market](https://news.wpcarey.asu.edu/20190627-shocker-sp-500-underperforming-stock-market) across those ninety-one years. The concentration has not eased since. Net wealth creation moved from $34.824 trillion at the end of 2016 to $47.381 trillion at the end of 2019, and [the share coming from a small group grew over that stretch](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills).

A later update ran the exercise over 29,078 listed common shares from December 1925 to December 2023 and found that 51.6 per cent of them finished with a negative cumulative return, with seventeen shares exceeding five million per cent, Altria leading at 265 million per cent, and Nvidia holding the best annualised figure at 33.38 per cent among shares with at least twenty years of data, [according to the paper's abstract as reproduced by the economist Tyler Cowen](https://marginalrevolution.com/marginalrevolution/2024/09/which-u-s-stocks-generated-the-highest-long-term-returns.html).

## Why the Average Share and the Typical Share Differ

The gap is produced by the shape of the possible outcomes, not by anything mysterious. A shareholding can fall by everything you put in and no further. It can rise without any ceiling, and compounding widens that asymmetry the longer a company survives.

So the distribution is nothing like a bell curve. Most listings produce something between a mild disappointment and a total loss, a handful compound for decades, and the handful carries the arithmetic for everybody. An index return is not a small payment collected from every constituent. It is a very large payment collected from a few of them and averaged across the rest.

That is also the quiet reason scoreboards comparing managers against benchmarks read the way they do, a point we take up in our piece on [reading the SPIVA scorecard](/spiva-scorecard-active-funds-vs-index-funds).

## The Same Result Outside the United States

A reasonable objection is that this describes one market over one unusual century. It does not. The companion study covering more than 64,000 common shares worldwide between 1991 and 2020 found 55.2 per cent of United States shares and 57.4 per cent of non-United States shares finishing behind one-month Treasury bills, with [the top 2.4 per cent of companies accounting for the whole of the $75.7 trillion in net global wealth creation](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills).

Two different samples, two different periods, two different sets of economies, and the same structure. That consistency is what turns an eye-catching statistic into something an investor should actually plan around.

## Two Wrong Lessons People Take From It

The first is to treat the winning fraction as a shopping list. In hindsight the names are obvious and the story of each one reads as inevitable. Looking forward they are indistinguishable from thousands of companies with similar prospects and better narratives, and several of the eventual giants spent long stretches looking entirely ordinary. The interesting group is identified by survival, which is not available in advance.

The second is the overcorrection: concluding that studying companies is pointless. The research makes no such claim. It says the distribution is lopsided, so a portfolio of a few names has a genuine chance of containing none of the companies that mattered, and that risk exists independently of how good the analysis behind each name was. Bessembinder himself frames the results as helping to explain why active strategies, which he describes as [poorly diversified](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills), most often fall behind.

## Coverage Beats Prediction

None of this is a recommendation. It is a way of framing the problem. If the gain is produced by a small set of companies whose identity is unknowable beforehand, then the dependable route to holding them is to hold everything, which is what a broad index fund does by construction. It holds the eventual winners because it holds everyone, and the losers inside it can each cost only what was allocated to them.

That logic needs no forecasting ability, which is precisely its appeal. It works because nobody has to guess correctly.

For anyone who still wants to own individual companies, the same finding supplies the discipline: a position sized so that losing all of it cannot settle the outcome, held beside a broad holding that covers the rest. The risk at the other extreme, where one winner quietly grows into most of the portfolio, is covered in our piece on [a holding that outgrew its slot](/concentrated-stock-position-management-options), and one specific group of modern winners gets the value treatment in [our look at the largest technology names](/how-value-investor-should-read-big-tech).

## Skill Is Not the Variable This Study Is Measuring

The usual argument about this research is whether it proves stock picking does not work. That framing is a mistake, and it is worth saying plainly: the study measures the shape of the opportunity set, not the ability of the people choosing from it. A skilled analyst and a careless one face the same distribution. Skill improves your chance of being right about an individual company. It does nothing to the fact that the gain lives in a small minority whose membership becomes visible only afterwards.

What follows from that is a sizing argument rather than a verdict. If the winners are rare, then the number of positions you hold and the weight you give each one matter more to the result than the quality of any single piece of research. A portfolio of six carefully chosen companies is not six times better researched than a portfolio of six hundred: it is a narrower sample of a lopsided distribution, and narrowness is the dominant term. That is an uncomfortable conclusion for anyone who enjoys the analysis, and it is the honest reading of the evidence. The habit of questioning advice that flatters the reader is the subject of our piece on [testing popular investment wisdom](/contrarian-investment-wisdom-four-lens-evaluation).

Overturning this would take evidence that some identifiable group of investors picks the rare winners repeatedly, before the fact, at a rate better than chance and after costs. Persistence studies keep looking for exactly that and keep coming back with very little. Until something turns up, the sizing argument stands and the skill argument is the smaller question.

## The Index Works Precisely Because Winners Are Scarce

A headline saying shares do not beat cash is a misreading of a real result. The market beat cash comfortably. The typical listed company did not, because the gain belonged to a few of them. Own enough of the market and you own those few without needing to name them first.

*This article is for educational and informational purposes only. It is not financial advice, and Investor Muse is not a registered investment advisor. Historical figures describe the past and do not predict future results. Speak with a qualified professional before you make decisions about your money.*

*Position disclosure: neither Investor Muse nor its editorial team holds a position in any company, fund or security named in this article.*

## FAQ

### Does this research mean individual shares are a bad idea?

Not on its own. It means the gain is produced by a small minority of companies, so a portfolio of a few names has a real chance of holding none of them. How much money goes into single holdings, and how large each one is, remains a personal decision.

### What is the study behind the claim?

Hendrik Bessembinder of Arizona State University compared the lifetime buy-and-hold return of every United States common share since 1926 with the return on one-month Treasury bills, using the CRSP database covering the New York Stock Exchange, the American Stock Exchange and Nasdaq.

### If most shares lose to Treasury bills, why does the market average look good?

Because the winners are enormous and the losers are capped. A company that multiplies many times over offsets a long list of companies that went to zero, since a loss stops at the amount invested while a gain has no ceiling.

### Do the exact figures change between versions of the research?

Yes. Different editions use different end dates, different counts of shares and different global samples, so the headline percentages move. The structure does not move: a small fraction of companies accounts for the net gain in every version published so far.


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Source: https://investormuse.com/blog/most-stocks-lose-to-treasury-bills-bessembinder