The headlines are hard to ignore. Big US companies – often household names – dominate the news when their market values soar. Many investors assume these “giants” will keep leading. But history suggests otherwise.
The rise and reversal of market leaders
From 1927–2024, companies entering the Top 10 by market value followed a striking pattern:
- In the three years before joining the Top 10, their average annualised return was 25% higher than the market.
- In the five years after joining, they often underperformed, with many falling behind the broader market.
Why does this happen?
By the time a company becomes one of the biggest in the world, much of the good news is already reflected in its share price. While new information can still move prices, these shifts are unpredictable and difficult to profit from consistently.
What it means for investors
Chasing the latest “winner” can backfire. A portfolio concentrated in the largest names risks missing opportunities elsewhere, and can become vulnerable if those giants stumble.
The takeaway
Past success doesn’t guarantee future outperformance. A well-diversified, disciplined approach that looks beyond today’s biggest companies gives investors a stronger foundation for long-term returns. If you’d like to explore how this applies to your own situation, complete the form below to connect with an Apex Advice investment adviser for tailored investment guidance.
Reference: Data adapted from Dimensional Fund Advisors.
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