According to a recent article in CNN Money, only if you attempt to sort out the handful of winners from the rest of the market.
As the article points out, the majority of individual securities tend to post negative returns over the long run.
In fact, research by Dimensional Fund Advisors found that from 1980 to 2008, the top-performing 25% of stocks were responsible for all the gains in the broad market, as represented by the University of Chicago’s CRSP total equity market database.
As for the bottom 75% of stocks in the U.S. market, they collectively generated annual losses of around 2% over the past 29 years.
So what can you do?
According to the article, diversify as broadly as you can. With a small list of stocks, it’s easy to miss out entirely on the top 10% performers. Doing so would have cut your annual returns to 6.6% from 10.4% over the past 29 years.
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