Do Stocks Outperform Treasury Bills? What the Data Shows

Ask a room of investors which single stock they would hold for the next 10 years, and you'll hear confident answers about moats, management and market share. Everyone has a story. Decades of research, though, suggest the harder question isn't which stock to own. It's whether the typical stock clears the lowest bar in finance at all.

So, do stocks outperform Treasury bills? As a group, historically yes. Individually, most don't. Here is what the data shows, and why it matters for anyone thinking about long-term stock returns.

Do Stocks Outperform Treasury Bills? The Short Answer

The answer depends on whether you're looking at the market or at a single stock.

• The market: A small group of top performers has pushed overall U.S. market returns above those of Treasury bills.

• The typical stock: About four of every seven U.S. common stocks since 1926 earned lifetime buy-and-hold returns below one-month Treasuries. That is the finding of Arizona State professor Hendrik Bessembinder, published in the Journal of Financial Economics.

Both statements are true at the same time. A handful of extraordinary winners lifts the market average, while most individual stocks fall short.

What the Research Found About Stock Market Wealth Creation

Bessembinder measured stock market wealth creation as the dollar gain shareholders earned above what the same money would have made sitting in T-bills.

The 4% That Drove All the Gains

• U.S. stocks created roughly $35 trillion in wealth above T-bill returns between 1926 and 2016 (W. P. Carey School of Business).

• All of it came from 1,092 companies, about 4.3% of the nearly 26,000 stocks studied.

• More than half came from just 90 companies, less than one-third of 1% of the total.

Why Most Stocks Never Beat Cash

• 58% of stocks failed to beat T-bill returns over their lifetimes.

• 38% beat T-bills, but only by moderate amounts.

• The most common lifetime result was a return of -100%, meaning a total loss.

Skewness in Stock Returns: Why a Few Winners Carry the Market

Statisticians call this pattern positive skewness. A stock can lose at most 100%, but its gains have no ceiling. Skewness in stock returns comes both from the monthly returns themselves and from compounding over time. The longer the holding period, the more extreme the gap between the few winners and everyone else.

Long-Term Stock Returns vs. Individual Stock Outcomes

Picture a room of 100 people when a billionaire walks in. The average net worth jumps, but the typical person in the room is no richer. Long-term stock returns work the same way: the market average reflects the outliers, while the typical holding does not.

Bessembinder tested this directly. He simulated a strategy that held one randomly chosen stock each month from 1926 to 2016, and it beat T-bills in only 27% of simulations. In other words, when people ask "do stocks outperform Treasury bills?" about a single holding, history's answer is usually no.

Is This Just a U.S. Phenomenon?

No. A follow-up study of more than 64,000 global stocks from 1990 to 2020 found that most U.S. and non-U.S. stocks underperformed one-month T-bills, and the top 2.4% accounted for all net wealth creation.

Single Stock Risk: The "One Stock for 10 Years" Problem

The "one stock for a decade" thought experiment is popular in investing forums. The data shows how much single stock risk it carries, and as the costs of concentration risk show, the damage goes beyond volatility:

• The odds are narrow. Finding a future top-4% stock in advance means picking from a pool where most stocks lag cash.

• Even winners fall hard. In the decade before their best decade, Bessembinder's top performers suffered an average maximum decline of about 52%, lasting around 22 months. That is why drawdown control matters as much as stock selection.

• Deep declines are the norm. Morgan Stanley research covering more than 6,500 companies from 1985 to 2024 found a median maximum drawdown of 85%.

• Conviction gets tested at the worst time. Holding one stock means sitting through those declines with nothing else to cushion them, and many investors overestimate their risk tolerance until they're in one.

What This Means for Your Stock Selection Strategy

Bessembinder himself stressed that the takeaway is the importance of diversification, not avoiding stocks, a point that applies to most portfolio diversification strategies. For any stock selection strategy, that comes down to a trade-off.

Breadth vs. Conviction

• Too narrow: You risk missing the rare winners and holding too many laggards.

• Too broad: You end up close to an index, and any single winner barely moves the portfolio.

• In between: Clear rules for how many stocks to hold, how much to put in each, and when to trim.

Rules Over Gut Calls

The most thoughtful answers in "one stock" debates usually focus on durable competitive advantages rather than exciting stories. A rules-based process applies that thinking consistently:

• Set screens in advance, such as profitability, balance sheet strength and competitive position. This is the core idea behind factor-based investing.

• Use position limits so no single holding dominates the portfolio.

• Review holdings on a schedule rather than in reaction to headlines.

How a Systematic Investing Strategy Approaches the Problem

A systematic investing strategy doesn't try to predict the next big winner. Instead, it fixes the process before emotions get involved:

• Screening: filters the universe using predefined criteria.

• Sizing: sets position weights by rule.

• Rebalancing: adjusts the portfolio on a set schedule.

• Backtesting: shows how the rules would have behaved historically, as long as the test avoids overfitting.

Rules-based approaches still carry risk. They can lose money, trail the market, or stop working when conditions change. Backtested results are hypothetical and don't predict future returns.

Key Takeaways

• Do stocks outperform Treasury bills? The market has historically done so. Most individual stocks have not.

• Roughly 4% of U.S. stocks drove all net wealth creation from 1926 to 2016 (W. P. Carey School of Business).

• The same skewed pattern shows up globally.

• Even the biggest winners went through deep declines along the way.

• How stocks are selected, sized and reviewed matters as much as which stocks are chosen.

A Rules-Based Approach to Stock Selection: The Signal 47 Multi-Factor Strategy

The research in this article leads to an uncomfortable conclusion: nobody reliably knows in advance which stocks will become the rare long-term winners. The Signal 47 Multi-Factor Strategy on Surmount doesn't claim to know either.

Instead, it takes the principles covered above and turns them into fixed rules: breadth instead of one bet, screens set in advance, limits on position size, and reviews on a schedule. If the main lesson here is that a repeatable process matters more than a single prediction, this strategy shows what that process looks like in practice.

How the strategy is built:

• Breadth instead of a single bet. It holds 25 U.S. large-cap companies across technology, healthcare, financials, consumer staples, energy and industrials.

• Four screens, set in advance:

  • Value: attractive relative valuations backed by strong free cash flow.

  • Dividend strength: established payers with stable or growing distributions.

  • Momentum: consistent price strength and market leadership.

  • Quality: resilient balance sheets and durable business models, which is the moat idea from the "one stock" debate turned into a rule.

• Built-in position limits. Holdings are equally weighted, so no single company can dominate the portfolio.

• Scheduled, not reactive. The portfolio is rebalanced every quarter rather than in response to headlines.

• Your brokerage, your account. Surmount connects to supported brokerage accounts, so your assets stay with your broker.

Risks and limitations to weigh:

• Factors fall in and out of favor. Value, dividend, momentum and quality strategies can each trail the broader market for long stretches.

• 25 stocks is not the whole market. The strategy is concentrated in U.S. large caps and holds far fewer names than a broad index.

• Rebalancing has costs. Quarterly reweighting can create trading costs and, in taxable accounts, taxable gains.

• Rules can't predict everything. Market conditions change, and the strategy can lose money, including principal.

• Backtests are hypothetical. Any backtested figures shown on the platform reflect hypothetical results and do not indicate future performance.

Explore How the Signal 47 Strategy Selects Stocks →

This content is for educational and informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. All investing involves risk, including possible loss of principal. Past performance does not guarantee future results.

Frequently Asked Questions

Do stocks outperform Treasury bills over the long run?

As a whole market, historically yes. But about four in seven U.S. stocks since 1926 earned lifetime returns below one-month Treasury bills, according to Arizona State professor Hendrik Bessembinder.

Why do most individual stocks underperform the market?

The answer is skewness in stock returns. A stock can lose at most 100%, but its gains are unlimited, so a small group of big winners pulls up the market average while the typical stock lags.

What percentage of stocks drive stock market wealth creation?

About 4% of U.S. stocks accounted for all net wealth creation above T-bills from 1926 to 2016. Globally, the top 2.4% drove all of it from 1990 to 2020.

What is single stock risk?

It is the chance that one company's poor results or a deep decline damages an entire portfolio. Even history's top performers had an average drop of about 52% in the decade before their best decade.

How does a systematic investing strategy approach stock selection?

It relies on screens, position limits and rebalancing schedules set in advance rather than on predictions. Like any approach, it can still lose money or trail the market.