Index funds work so well for two primary reasons: (1) a very small number of stocks always account for the majority of returns (recently FANG plus Nvidia; historically Cisco, Microsoft, Dell, General Electric, Intel), and (2) it is extremely difficult to predict in advance which companies will be the big winners, so owning the index guarantees you will own them regardless.

causalpending

Speaker

Morgan Housel

Evidence Quote

it's always going to be the case that a very small number of stocks account for the majority of returns

Source

Morgan Housel: What You Need to Master (And Avoid) to Get Rich, Stay Rich, and Build WealthThe Knowledge Project Podcast
Created: 8/10/2026, 11:10:02 PM

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