• The S&P 500 Doesn’t Deliver Average Returns
• Investing At All-Time Highs Outperforms Any Other Given Day
• Just 4% of Stocks Have Contributed to 100% of Wealth Creation
• The Bottom 490 Stocks Have Outperformed the Top 10
• Removing the Single Largest Stock Outperforms by 0.27%
• 75% of Alternative Funds Have Died
• Why IULs Are So Bad
• The Best Dividend Strategy Is To Avoid Them
• Berkshire Stock Could Drop 99% and Still Be Ahead

It’s that time of year again. Time to step back from the complex tax strategies, the Roth conversion debates, and the retirement planning deep dives, and have a little fun.

For the past few years, I’ve dedicated an episode to sharing surprising statistics about the markets, investing, and retirement planning. These episodes have become some of my favorites to research and record, and based on your emails, many of you enjoy them too.

So today, I’m sharing seven facts that challenge conventional wisdom.

Some of them are counterintuitive. A few might even make you question things you’ve believed for years. And at least one of them involves math that should make anyone using insurance products as a retirement savings tool hit the pause button.

By the end of today’s episode, you’ll walk away feeling a little more confident about the proven, sometimes boring, academic approach to investing that we talk about so often here on the show.

And if nothing else, you’ll have a few holiday-dinner stats to drop between bites of pie—far safer than politics, and only slightly riskier than talking about crypto.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you stay wealthy in retirement. Ok, onto today’s episode.

7 Investing Facts Every Retirement Saver Needs to Hear

Retirement Investing Fact #1

Let’s kick things off with a statistic that gets to the heart of how most people think about investing.

If I asked you what the average, historical annual return of the S&P 500 is, most of you would likely answer correctly by saying around 10%. Over the long run, that’s the number everyone references. It’s the number many financial advisors plug into projections. And it’s the number that makes the math appear to work in a lot of retirement simulations.

But here’s the thing. The stock market has only produced an annual return within 2% of that 10% average in 4 of the last 97 years. Four years out of nearly a century. The highest annual return during this period measured was a gain of 53%, the lowest was a loss of 44%, and yet many investors talk about 10% like it’s some kind of reliable return we should expect most of the time.

The lesson here isn’t that the 10% average is wrong, or that it shouldn’t be used as a starting point in long-term planning assumptions—it’s that the average is basically a myth in any given year because the market almost never acts normal. And instead of viewing wild price swings as a sign that something is broken or there’s something to be concerned about, we should see them as the price of admission.

In other words, you’re not getting paid a healthy premium from the stock market just to wait—you’re getting paid to stay calm during the scary drops that make other people panic and quit. Think about it this way, if the stock market actually delivered a reliable 10% return every year, it would be considered as safe as a savings account and, in turn, would pay just as little.

The daily chaos isn’t getting in the way of your profit, it’s the exact reason you earn it.

Retirement Investing Fact #2

Now, speaking of conventional wisdom that doesn’t hold up, let’s next talk about market timing and the fear of investing at all-time highs.

You’ve probably heard people say they’re waiting for a pullback before putting money to work. Or maybe you’ve felt that hesitation yourself when the market is breaking records—that nagging feeling that buying now means you’re buying at the top. Well, I’m here to tell you that the data tells a different story.

Specifically, since 1989, money invested when the market is at all-time highs has actually outperformed money invested on any other given day. You heard that correctly—putting money to work on days when the market hit new all-time highs has outperformed investing on any other given day. Let’s dig in a little deeper. According to research shared by Peter Mallouk, from September 1989 through November 2025, the 5-year average forward return when investing in the S&P 500 at an all-time high was 82%. When investing during all other time periods, the 5-year average return was 74%, an underperformance of 8%. I know, it’s wildly counterintuitive. Investing at what feels like the worst possible time—when the market is hitting record highs—has historically produced better results than investing during pullbacks or corrections.

And this stat reminds me of an example Nick Maggiulli shared when he first came on the show a few years back. He talked about an investor in early 2017 who was convinced the market was overpriced, so they sat in cash and waited for the “inevitable” collapse before investing. Well, the crash did come roughly three years later in March 2020 when the S&P 500 fell about 34% in just two weeks. And Nick’s point was brutal: even if this investor had a working crystal ball and invested every dollar at the exact bottom on March 23, 2020, they still would’ve been buying in at prices roughly 7% higher than they could’ve paid back in early 2017.

That’s the paradox of market timing. It’s not enough to be right about a crash—you have to be right and early enough to make up for all the market gains you missed while waiting in cash. In most historical cases, the “missed time” costs more than the dip ever saves you.

So why does investing at all time highs outperform money invested on any other given day?

One of the most agreed upon explanations is that all-time market highs tend to signal market strength and momentum rather than an imminent decline. Markets that are hitting new highs are often doing so because earnings are growing, the economy is expanding, and investor confidence is justified. Holding back cash in hopes of a pullback may feel prudent and may even help you sleep a little better at night, but statistically, and historically, it’s more likely to result in missed opportunities over the long-term.

Retirement Investing Fact #3

Now, if the first two facts we just covered make you feel good about staying invested, this next one should reinforce why diversification matters so much.

In a Journal of Financial Economics study that analyzed a total of 26,000 publicly traded common stocks over the last 93 years, researchers found something that surprises most investors: Just 4% of stocks were responsible for 100% of the stock market’s wealth creation. The other 96% of stocks collectively broke even. Let me say that again. 96% of individual stocks—about 24,960 stocks—collectively broke even across this 93 year time period. In other words, as a group, they didn’t add to investors’ long-term wealth in any meaningful way.

And it gets even more sobering. The same study found that 58% of all the stocks failed to beat Treasury bills (i.e., cash) over their lifetimes. And the single most frequent outcome for an individual stock was a negative 100% return, a total loss—either from going belly up or from getting delisted. In other words, the majority of stocks actually don’t remain in the database.

So why does the market as a whole still produce attractive returns over time if most stocks don’t pull their weight? Because, when you buy shares of a company, when you buy stocks, your downside is capped at 100%, but your upside is essentially unlimited. A small handful of “superstar” companies—think the Apples, Amazon’s, and Nvidia’s of the world—can grow so much that they more than offset the thousands of disappointments and blowups.

But here’s the catch: you don’t know in advance which companies will become the superstars. Nobody does. And even if you did, I would argue that it’s highly unlikely most investors could stomach the volatility of one or a few individual stocks. Don’t forget, even superstar companies go through challenging times, like when Amazon dropped 95% from its peak in the early 2000s.

For retirement investors, this highlights the critical necessity of broad diversification through index funds. When you own the entire market, you’re not trying to guess the winners—you’re ensuring you capture that critical 4% that drives the majority of long-term growth. If you build a portfolio stock-by-stock, the odds aren’t in your favor. In fact, statistically, it’s much easier than most people realize to end up owning a collection of stocks that looks a lot like the 96%—the group that, in aggregate, doesn’t build wealth.

Retirement Investing Fact #4

Now, after hearing all of this, a lot of people have the same reaction:

“Okay, if only 4% of stocks drive the returns, why not just buy the biggest, most successful companies out there, the ones that have already proven themselves?”

Unfortunately, the data doesn’t support that either, which leads us to fun fact #4.

In a recent study, Hartford Funds looked at S&P 500 returns since 1970 and compared two baskets: the 10 biggest companies—the ones with the largest weighting in the index—and everyone else, the other 490 companies.

Believe it or not, the “other 490” outperformed the top 10 in about 70% of all rolling five-year periods. And by “rolling five-year periods,” I mean, they didn’t just look at just one five-year stretch. They examined every overlapping five-year window since 1970, typically moving forward one year at a time. That’s important because it shows this result held up across many different market environments, not just a single, cherry-picked period.

And that helps explain another counterintuitive result from a separate long-term look at the index: According to a study quoted by Meb Faber, since 1972, if you took it a step further and removed just the single largest company from the S&P 500, and simply owned the other 499, you would’ve outperformed the S&P 500 by about 0.27% per year.

I’ll say that again because it’s truly a wild statistic: Since 1972, if you owned a custom version of the S&P 500 and kept removing the current largest company in the index as it changed over time, the other 499 stocks would’ve outperformed the full index by about 0.27% per year.

So why would removing the biggest company improve results? Well, it comes down to two simple ideas: concentration and mean reversion.

To put it simply, when the market gets top-heavy, a handful of companies start carrying an outsized share of the index. For example, as of today’s recording, the top 10 holdings in the S&P 500—companies like Nvida, Amazon, Apple, Broadcom, and Tesla—the top 10 holdings in the S&P 500 as it stands today currently represent nearly 40% of the index. In other words, 40 cents of every dollar you allocate to a traditional S&P 500 fund is invested in the 10 biggest companies. And the bigger these companies get, the more your future results depend on just a few names continuing to deliver attractive returns.

Next comes mean reversion. In plain English, mean reversion is what happens when yesterday’s biggest winners eventually cool off—growth slows, competition catches up, and valuations come back down to earth. And not necessarily because they become bad companies, but because it’s hard to keep exceeding already sky-high expectations.

So, to summarize, the companies that look unstoppable today often deliver more modest returns tomorrow, while smaller, or less-loved parts of the market, quietly catch up and have higher future returns than most expect. And history repeatedly gives us great examples to look back on.

To highlight one of them, back in 1972, investors were obsessed with the “Nifty Fifty”—names like IBM, AT&T, and Eastman Kodak. These were seen as “can’t miss” companies to invest in, and they traded at huge valuations. Then the 1973–74 bear market hit, and many of those former leaders lagged for over a decade afterward.

That’s the historical pattern: when a stock reaches the number-one spot, or the top 10 spot, it’s often priced for perfection. And if perfection fades—even slightly—the valuation can compress and returns can disappoint.

So the lesson isn’t to “avoid big companies,” it’s “don’t confuse past success with future returns, and don’t let excitement about what’s already worked push you into a concentrated portfolio.”

Retirement Investing Fact #5

Ok, shifting gears here, let’s use fun fact #5 to talk about complex investment products and some uncomfortable data about their track record.

On January 1st, 2015, there were 1,345 alternative mutual funds in existence. These were funds that utilized hedging, shorting, or trend-following strategies. They had names with terms like multi-alternative, market-neutral, and absolute return. They promised sophisticated approaches that would deliver strong risk-adjusted returns regardless of market conditions.

Sounds enticing, but guess how many of those alternative funds still exist today? 341. The other one thousand or so have been liquidated or merged. If you quickly did the math, yes, that’s a 75% mortality rate. And the mortality rate is actually higher the further back you look. Whether the fund launched around the time of the global financial crisis or in the years that followed, we’ve seen a lot of these strategies come and go.

Jeffrey Ptak from Morningstar wrote a great article on the topic earlier this year and concluded it by offering three key lessons from this data that I think are worth sharing with everyone today.

First, the more rhapsodic and enthusiastic the sales pitch is, the more you should plug your ears. When you consider the higher fees and greater complexity these investments entail, the onus ought to be on the seller of these products to make a convincing case backed up by peer evidence and practical, real-world results. Until then, tune it out. And, by the way, this advice that I agree with applies to traditional investment pitches as well, and is not restricted to just alternatives or private equity funds.

Second, the more action there is in an area, the more space you ought to give it. For example, when hedge fund strategies were crushing traditional portfolios before the financial crisis, fund companies responded by launching a multitude of alternative mutual funds to capitalize on the trend. And almost on cue, right as these high cost, complex products reached maximum popularity, a simple low cost 60/40 allocation pulled ahead and began outperforming.

Lastly, the third and final lesson he shared was that the more enticing the payoff, the deeper you ought to dig. As previously mentioned, one of the big selling points for these investments is their potential to generate strong risk-adjusted returns, i.e., an attractive return without excessive volatility. But with many alternative and private investments, you’re typically committing your capital for years, sometimes a full decade. In other words, your investment is locked up and inaccessible. This feature has its benefits, but if buyers remorse sets in after making your investment or you end up needing those dollars for some other purpose before the lock up period expires, you’ll be forced to get the money from somewhere else.

As fund companies now race to bring high-fee private equity and debt strategies to the masses, that same binge-purge pattern seems likely to repeat.

Retirement Investing Fact #6

Now, sticking with the theme of complex products that sound too good to be true, the next fun fact reveals some important information about Indexed Universal Life insurance policies.

If you’re not familiar, Indexed Universal Life, or IUL, is a type of permanent life insurance that’s often pitched as a way to participate in stock market gains without taking stock market losses, while also building tax-advantaged cash value. And on paper, the sales illustrations shown to potential investors can look incredible, showing strong, steady returns year after year for decades.

But here’s what those illustrations often don’t highlight clearly:

First, the insurance company controls the levers. They set the cap rate—which is the maximum return you can be credited in a given period. They also set the interest rate on policy loans; and that matters a lot, because many of the strategies being marketed to mom and pop investors depend heavily on borrowing against the policy to achieve the overly optimistic results shown by the salesperson. So if you buy one of these, you’re essentially committing to a decades-long strategy where a large part of your outcome depends on the insurer’s future decisions on caps and loan rates… often while you’re highly leveraged inside the policy.

Second, there’s the cost of insurance. As you age, those internal insurance charges typically rise, and your individual policy has to fund them. If those costs climb faster than projected—or if returns come in lower than illustrated—your cash value can get drained far sooner than the glossy illustration suggests.

Third, many aggressive sales pitches involve “hyper-funding”—putting in large premiums, sometimes even using loans to stuff more money into the policy. The illustration may show it working beautifully… but it’s usually assuming very favorable conditions: high returns, predictable crediting, and effectively no real-world volatility. But that’s not how markets behave. Remember that first statistic we talked about—returns don’t show up in neat, steady “average” lines. They come in waves. And on top of that, interest rates move, caps can change, and policy costs can increase.

So when you combine changing caps, changing loan rates, rising insurance costs, and real market volatility, you get a strategy that can be far more fragile than it looks on a spreadsheet.

So if someone is pitching an IUL primarily as an investment or a retirement savings vehicle, proceed with extreme caution. And if the illustration looks too good to be true, it almost certainly is.

Retirement Investing Fact #7

Alright, one more statistic to share before we wrap up, and this one is for the dividend investors out there.

Since 1974, the 100 highest-yielding dividend stocks have returned roughly 14% per year, compared to about 11% for the S&P 500. If you stop the analysis there, it sounds like dividend investing is the clear winner. And honestly, that’s where most articles and marketing materials stop. But the researchers behind this study asked a more realistic question:

“What do you actually keep after taxes?”

Because dividend strategies don’t just generate returns—they generate taxable income every single year, and that tax drag compounds over decades. Once they modeled real-world dividend taxes along the way, that same high-dividend strategy fell from 14% down to 8.5% to 9.5% per year, depending on the tax rate–about the same as the S&P 500’s after tax return. What looked like a 3% annual advantage before taxes turned into a dead heat after taxes.

If an investor was truly looking for the clear winner, here’s where it gets really interesting: in this same study, over the same time period, a simple value strategy that deliberately avoided the highest dividend payers did far better after taxes. Specifically, a value index that removed the top 25% of dividend payers from the portfolio delivered after-tax returns as high as ~15.5% per year.

And perhaps even more surprising, a version of that value strategy that eliminated ALL dividend payers entirely still returned just over 13% per year on average—without the constant annual tax bill that high-dividend investors sign up for.

Same general asset class. Same decades measured. But one strategy gave up nearly five percentage points per year, simply because of taxes. That gap is staggering—and it reinforces something we repeat often on this show: total return after taxes—not yield, not income, not headlines—is the only return that actually matters.

So, if the math is this clear, why do investors still love dividends so much? The researchers behind this study point to the Pepsi Challenge to answer this question. In case you aren’t familiar with the Pepsi Challenge, in blind taste tests going back to 1975, the Pepsi Challenge has revealed that people prefer Pepsi over Coke. But the moment the labels were removed, most people still chose Coke. In other words, the brand overpowered the evidence.

Dividend investing tends to work the same way. Investors love the idea of dividends—the steady checks, the feeling of income—even when the math shows they’re often worse off after taxes than other simple, evidence-based strategies. In this case, the “brand” of dividends overwhelms the data.

Warren Buffett is a perfect real-world example of this distinction. His company, Berkshire Hathaway, has owned plenty of dividend-paying companies throughout its history—but never because of the dividend. Buffett has always focused on buying quality businesses at attractive valuations with strong long-term economics. Some of those businesses happen to pay dividends. But just as a smart investor does, the yield itself has never influenced or been the primary driver of his decision.

And notably, Berkshire Hathaway, doesn’t pay a dividend at all. In fact, the company paid exactly one dividend back in 1967—and Buffett has said he regrets it, once joking, “I must have been in the bathroom when the decision was made.”

How has that worked out for the company’s performance? I’ll put it to you this way – Berkshires stock price could drop 99% and still be ahead of the S&P 500 since Buffett took control of the company in 1965. Buffett’s reason for not paying a dividend is simple and brutally logical: if capital can be reinvested at higher returns—through growth, acquisitions, or buybacks—paying it out can actually destroy long-term value.

Now, I want to be extra clear about the takeaway here. Dividends are not “bad.” As I covered in my four-part dividend series last year, when you drill into it, dividend investing is rooted in value investing. And since decades of academic research show that value investing improves expected returns, it’s not surprising that baskets of value-oriented stocks—many of which happen to pay dividends—have outperformed broad indexes like the S&P 500.

The problem starts when investors focus purely on the yield of a stock or fund–the amount of income it might provide them in retirement.

As Meb Faber put it bluntly:

“If you’re adamant about buying dividend stocks, you must include a valuation screen to avoid the expensive, junky ones.”

In other words, dividend yield alone is a terrible portfolio construction tool. If you choose to pursue dividend stocks—whether for personal preference or psychological comfort—valuation still matters, taxes still matter, and ignoring either can cost you far more than those quarterly checks are worth.

Bottom Line

So, what’s the common thread connecting all seven of these facts?

I’d argue it’s this: when it comes to investing, our instincts often steer us in exactly the wrong direction.

We expect average returns, but the market almost never delivers them. We wait for pullbacks, but investing at all-time highs has historically outperformed. We try to pick winners, but 96% of stocks collectively break even. We gravitate toward the biggest, most successful companies, but the largest names have historically dragged on returns. We’re drawn to sophisticated strategies, but the majority significantly underperform, or worse, disappear. We’re sold complex insurance products with illustrations that assume a world without volatility. And we chase dividend yield, even when evidence proves there are better strategies and the math shows us what taxes do to our returns.

In each case, the approach that feels safe, smart, or sophisticated tends to underperform the boring alternative: broad diversification across proven asset classes, low costs, tax efficiency, and the patience to stay invested through the chaos.

That’s not exciting. It doesn’t make for viral headlines or compelling sales pitches. But it’s what the data, exposed through all seven of these fun facts, keeps telling us works.

Thank you, as always, for listening, and if you’d like to review any of the sources and research supporting today’s episode, just head over to youstaywealthy.com/263.

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.