Wall Street’s Dirty Little Secret

96% of stocks are losers.

For years, we’ve been told that the stock market is the best place to build long-term wealth.

And for the handful of investors who happened to own Apple, Microsoft, Nvidia, or a few other standout companies, that’s certainly been true.

The problem is that most investors don’t own tomorrow’s winners.

In fact, according to a landmark study recently updated by Arizona State finance professor Hendrik Bessembinder, 96% of the nearly 30,000 companies listed on US stock exchanges since 1926 performed worse than simply parking your money in one-month Treasury bills. In other words, almost all of the wealth created by the US stock market came from an extraordinarily small group of companies.

That’s bad news… but not the worst of it.

That Arizona State survey also showed that not only did investors miss out on available gains… many lost huge amounts of money on bad bets. That’s because US investors tend to buy on hype and FOMO rather than fundamentals.

You might remember an automaker called Rivian. Its IPO in November 2021 was eagerly awaited. Throughout the Covid lockdowns and beyond, punters sank billions upon billions into companies like Rivian, swallowing the IPO hype hook, line, and sinker. Since then, Rivian shareholders have lost nearly $90 billion.

Another example of immense wealth destruction in the stock market was WorldCom. After achieving a valuation well over $100 billion in the heady days of the dotcom boom, the company filed for bankruptcy in 2002. Investors lost $115 billion of wealth.

More recently, SpaceX listed at an absurd valuation of $1.77 trillion. Based on its 2025 operating profit, that means US investors were prepared to buy a company whose stock price was 477 times its 12-month trailing earnings per share (price to earnings ratio, or P/E).

Putting that in perspective makes my point. The P/E ratio in the US stock market is 28. The long-term historical average is 16. In Europe, the average P/E ratio is 11. And yet people still bought SpaceX at 477.

The Arizona State study—and the SpaceX IPO—show a clear pattern. US investors tend to chase stocks whose prices are rising fastest rather than those with a clear path to profitability.

Particularly since the rise of the Internet and social media, the perception of future gains has overtaken a clear-headed assessment of actual profitability. Repeatedly, investors lose huge amounts of money by buying wildly overvalued stocks, only to see them collapse. That in turn negates any gains they might have made on actually profitable companies.

So, what’s the answer?

One is to do what a surprising number of financial analysts do: Stick to index funds. At least that way you’ll get part of the gains from the stock market’s winners.

But there’s another option: Take some of your money out of volatile financial markets and put it into the one thing that’s always profitable in the long run: land and buildings.

I decided to invest much of my wealth in foreign real estate… and as a result, I’m getting better returns than 96% of US stocks… and most US investors. After my wife and I sold our home in Atlanta in early 2025, we invested the proceeds in property here in Cape Town. Thanks to a strong rental market, we’re making a combined yield of 12%. But once you consider the depreciation of the US dollar versus the South African Rand, our yield jumps to 21.5% in dollar terms.

In other words, to make the same gains I’ve made by investing in foreign real estate, I’d need to have made at least 21.5% in the US stock market over the last 12 months. That’s more than someone who invested only in US index funds would have made.

The problem is that many investors don’t stick to index funds. They chase short-term profits on popular stocks, eventually losing their shirts. Their money ends up in black-hole stocks like Rivian or WorldCom. Meanwhile, our rental properties keep generating cash and appreciate in value in this growing middle-class city.  The same is true of dozens of other real estate markets around the world.

So, when people like Ronan McMahon, Jeff Opdyke, and I recommend investing in foreign real estate, we’re helping you get stock market-beating returns… and keeping your money out of the black hole of the US stock market.