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Written by The Motley Fool Team for The Motley Fool
We at The Motley Fool seek market-beating stocks. But we also know the odds.
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The cold reality is that the majority of stocks underperform. The stats vary by source and time frame. Generally speaking, only about 40% to 45% of stocks beat the market over one year. That drops to roughly 30% to 35% over five years, and even lower over 10 years.
Then there’s the research of Hendrik Bessembinder of Arizona State University with two major findings:
So what’s a Fool to do? Follow the example of the late, great Peter L. Bernstein, a respected investing historian, philosopher, and author (including such classics as Capital Ideas, Capital Ideas Evolving, and Against the Gods: The Remarkable Story of Risk).
Before Bernstein died in 2009, Robert Brokamp from Team Hidden Gems had the opportunity to interview him and ask how he managed his investments.
In my own portfolio, I am essentially buy and hold … I am very diversified … Diversification is not a passive strategy. It is an aggressive strategy because, unless you are fully exposed, you may miss the big winner. It isn’t just trying to protect against loss; you also want to be sure you are exposed to opportunity.
Bro’s takeaway? If you pick stocks, cast a wide net. That’s the best way to increase the odds you’ll catch the rare big winners.
That idea sits at the heart of how Team Rule Breakers and Team Hidden Gems invest. A Fool from each team further explains.
This research explains why Team Rule Breakers leans so heavily into winners. Water your flowers and cut your weeds is our mantra. And as David Gardner likes to say: “In order to win, you have to be ready to lose (some).”
Casting a wide net is what venture capitalists do, as they know some of their investments will not pan out. Diversify, and then let the winners run until you are made whole and then some.
When a small group of companies creates most of the market’s wealth, our job is to find tomorrow’s top dogs early and give them years to compound. In our experience, selling a great company too soon costs investors far more than holding a loser too long.
Most investors think investing is a game of averages. In baseball parlance, they hit for singles or doubles. Investing is really driven by power laws. It’s a game of home runs and grand slams.
That’s why the market has gone up 10% per year over the last 50-plus years, but, as Bro points out, the average stock badly underperforms. And many lose money! Yet the big winners march ahead.
Team Hidden Gems knows it takes singles and doubles that ultimately turn into home runs. We want both! So we turn over lots of rocks across market caps and styles, knowing that a few we find will turn out to be all-stars. Others will prove to be profitable doubles. Of course, we’ll have some strikeouts too. They are inevitable. But those grand slams — those monster winners — come only to investors who keep swinging and letting those winners run.
How many stocks do you own? Too few, too many, or do you think they’re just right to catch the big winners?
Debate with friends and family, or become a member to hear what your fellow Fools are saying!
When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 936%* — a market-crushing outperformance compared to 213% for the S&P 500.
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*Stock Advisor returns as of September 26, 2026.
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