Thought experiment: universe of 100 stocks. One of them returns 1000%, and the other 99 return 1% each. So the average return is 10.99%. Then, portfolios of 10 stocks are created at random. How many will beat the market? Equal to the chance of picking the big winner, only 9.6%.
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The market's long-term returns are dominated by a small number of huge winners. I wonder how much of the difficulty of beating the market is due to this effect?
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Replying to @walt373
This begs the question: have markets become more winner-take-all? It's hard for me to imagine that in the 1800s and 1900s single companies were able to lord over our economies like the software giants of today.
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Replying to @Molson_Hart @walt373
Rockefeller and the other businessmen of his time are great to read about.
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The prize by Yergin
9:46 PM - 5 Oct 2019
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