One of the suggestions you will hear is when investing have a broadly diversified portfolio and logically it makes a great deal of sense. Generally all sectors move on slightly different waves and one sector tends to be higher in the summer and another in the winter time. Owning both with get you the benefits of both. Recently an Arizona State University professor Hendrik Bessembinder published information which says 4% of the stocks account for all of the net stock market gains. The other 96% matched Treasury bill returns.

Tim Shuflet writing in the Globe and Mail says this study means you have to look at ETFs besides the low-cost (which is a very good thing) when you buy an index is this the best thing to do? One of the great thing about indexes is they exchange winners on the market for losers. This means over the long-term, the index will automatically do well. The concern based on the study is examining the performance of 26,000 stocks listed on the US exchange between 1926 and 2015, just 86 of those stocks generated half of the market’s wealth creation. Another 900 counted for the rest. The 25,000 names the market went up and down. The index will own names which do not do well. Professor Bessembinder says the top 86 perform so well, if you owned a diversified portfolio, the good ones can make a winner of your holdings.

Linking to dividend paying stocks, if you want to consistent beat the market, you need to focus on the top 4% stocks recognizing once in a while a high performer tumbles down quickly. If you own profitable dividend stocks, once in a while they will be in the high performers but are more likely to the 900 moving upwards on a year to year basis. Your total return of stock appreciation and dividends received will tend to beat the market but not necessarily a high flyer. You will not be exposed to higher risks and your most important issue with the company will be does it make money? then how? and is it sustainable for as long as you own your shares.

There are more questions than answers, till the next time – to raising questions.