Most stocks – in Ireland and beyond – are flops

If you invested $1,000 in Nvidia 10 years ago, it would be worth over $115,000 today. Don’t feel bad if you didn’t – anyone invested in index funds has been enriched by Nvidia’s rise.

Financial researcher Prof Hendrik Bessembinder is famous for research showing most stocks are flops, but market indices still do well over time due to the huge returns delivered by a few big winners such as Nvidia and Apple. In the latest Financial Analysts Journal, Bessembinder’s analysis of 64,000 global stocks between 1990 and 2020 shows more than half underperformed US treasury bills.

The top-performing 2.4 per cent of companies account for total stock market gains ($75.7 trillion) over that period. The other 97.6 per cent, collectively, basically did nothing.

The Irish market is little different. Just five stocks – CRH, Ryanair, Kerry Group, Flutter, and Kingspan – account for total stock market wealth created over that period. More than half of Irish stocks (51.2 per cent) lost money, while 56 per cent underperformed risk-free US bonds.

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[ Analysts divided over narrow market rally ]

The median Irish stock fell by 5.6 per cent. Like its international counterparts, the Irish stock market proved a fine 30-year investment, but most Irish stocks were anything but.