The most underpriced asset is patience
The most underpriced asset
A new paper landed this week, and its timing could hardly have been better. Hendrik Bessembinder, updated through December 2025, has now run the numbers across a full hundred years of US stock market data: 29,754 companies, and some USD 91 trillion of wealth created above Treasury bills.
The number that stopped me was not the USD 91 trillion. It was the median buy-and-hold return across all of those stocks, which comes in at minus 6.87 per cent.
More than half of every stock that has ever listed destroyed value, nearly 60 per cent underperformed a simple cash benchmark, and only 28 per cent managed to beat the market index, so that the greatest wealth-creating machine in human history has, at the level of the individual company inside it, delivered a negative median return. The USD 91 trillion was entirely real; it was simply generated by only 3.72 per cent of the firms.
The standard response to this data, and very much the market-led one, is passive ownership: five hundred names, broad exposure, no stock-picking required. But the S&P 500 is not the broad basket it is sold as. It is really eight stocks doing most of the structural work, held alongside several hundred value destroyers acting as ballast, and when those eight come to represent something like 30 per cent of global market capitalisation, buying the index does not actually spread your risk. It spreads your exposure across a distribution most of which is negative, whilst your returns flow almost entirely from a handful of extreme winners. You are not avoiding concentration at all. You are simply inheriting yesterday's concentration, passively and retrospectively, without ever having made a single active decision about it.
And that matters, because staying passive through a market that is growing more concentrated by the year is still a decision; it is just one taken by default rather than by conviction.
The more interesting question is what it would actually take to tell the 3.72 per cent apart from the 59 per cent, and here Bessembinder's data offers a partial answer, and a distinctly counterintuitive one. The stocks with the very highest cumulative returns over the century, Altria at some 4.4 million per cent and Vulcan Materials at half a million, did not get there through extraordinary annual returns at all. Altria's annualised return was 16.5 per cent, and the median annualised return among the top thirty long-run performers was 13 per cent. What separated them from everyone else was not genius. It was duration. Altria's annualised return was only 1.18 times Vulcan's, and yet its cumulative return was 8.81 times larger, because small differences, held for long enough, quietly become enormous distances.
This is the part that behavioural finance makes strange. The mathematics of compounding could not be simpler; its emotional execution is almost impossibly hard.
Investors like to talk about conviction investing as though it were primarily an intellectual exercise, a matter of finding the right companies and building the right thesis, and it is partly that. But Bessembinder's data quietly suggests that the intellectual part may be the easier part, and that the harder part is the staying: the willingness to hold on through the stretches when the thesis looks wrong, when the stock has been flat for three years, when the narrative has turned and the whole weight of received opinion is leaning against you. The hundred-year winners did not deliver anything like straight lines. They delivered decades of compounding interrupted by crises, by drawdowns, by long spells of apparent mediocrity, and the investors who actually captured those returns had to sit with the uncertainty for years at a time. Most of them did not.
This is where the two questions meet. Breadth feels like safety, and five hundred names feels more prudent than fifty, but within equities breadth is not risk reduction; it is median dilution. The genuine risk reduction happens across asset classes, whilst within equities the real question is whether your concentration is deliberate and forward-looking, or accidental and backward-looking. And then, quite separately, whether you can hold on to it on the day the reason to sell feels far more vivid than the reason you first bought.
The concentration figures in the update sharpen the point further still. In his original 2018 study, 89 firms accounted for half of all the net wealth created through 2016; updated through 2025, that number has fallen to 46. Thirty firms accounted for 61 per cent of the USD 48 trillion created in just the last nine years, and Nvidia alone accounted for 9.3 per cent of it, which is worth setting beside Exxon Mobil, the top cumulative wealth creator through 2016, at 2.9 per cent of everything created over the preceding ninety years.
Whether that concentration goes on is one of the defining investment questions of the coming decade, and Bessembinder puts it directly in his conclusion: will artificial intelligence accelerate the winner-takes-all dynamic, or open up space for more specialised firms to thrive? Most forecasts simply assume continuation. But every previous concentration in the hundred-year record eventually redistributed, so the question is never really whether it will. It is whether you can absorb the psychological cost of being early when it does, of holding a view that has not yet been rewarded and may not be for some time yet.
What I take from the paper is not a formula. It is a restatement of something I have believed for a very long time, now backed by a full century of evidence: that patience is the most underpriced asset in markets.
Not patience as passivity, though, and not the mere owning of everything and waiting. Patience as the active, disciplined, behaviourally-informed willingness to hold a concentrated position, often as one part of a properly diversified portfolio, through exactly the periods when holding it is uncomfortable, and in doing so to stay invested long enough for the compounding to do its slow work. Most investors exit too early, and not, as a rule, because they were wrong about the company. They exit because the emotional cost of staying eventually rises above the intellectual argument for it.
The market created USD 91 trillion for the patient and the concentrated, and it delivered minus 6.87 per cent at the median. That arithmetic is available to very nearly everyone. Almost no one captures it.