Markets love a good success story. Lately, the biggest names have stolen the spotlight. But while the rise of market giants like the “Magnificent 7” makes for exciting headlines, history tells a different story. The biggest stocks often shine brightest just before their performance cools off. Understanding why can help investors stay grounded, focused, and better positioned for long-term success.
It’s hard to ignore the excitement around market giants. Oftentimes, they are the companies that dominate the news, the indexes, and sometimes our portfolios. But here’s a surprising fact: the biggest stocks tend to deliver their best returns before they become the biggest.
Research from Dimensional Fund Advisors shows that companies entering the top 10 largest by market cap outperform the market by more than 25% in the three years leading up to that point. But five years after joining the top 10, those same stocks, on average, lagged the market by almost 2% per year.
Average Annualized Outperformance of Companies Before and After The First Year They Became One of The 10 Largest in The US
(Compared to S&P 500 Index, 1927-2024)
Source: Dimensional Quick Take
Once a company becomes a household name, much of its future success is already “priced in.” That doesn’t make it a bad investment. It just means expectations are high, and continued outperformance becomes harder to sustain.
One of the most common investor traps is chasing performance — buying what recently went up and selling what recently went down. It’s a natural reaction, but not a productive one.
A study of thousands of mutual funds found that most top performers failed to stay on top. In fact, only about a third of funds ranked in the top 25% of returns over one five-year period maintained that position in the next five years.
Percentage of Top-Ranked Funds That Stayed on Top, 2005 - 2024
True success comes from consistency, not trend-chasing. A well-structured, diversified portfolio gives you exposure to the entire market so you capture the next leader before it becomes one.
Every day, billions of dollars move through global markets. Each trade reflects countless investors processing new information in real time. By the time a news headline hits your feed, the market has likely already reacted.
That’s why trying to “outguess” the market is so difficult. Over the past 20 years, only 17% of U.S. stock funds beat their benchmarks1. But funds using disciplined, evidence-based strategies succeeded 84% of the time.
If you’ve ever wondered whether to “sit out” a volatile stretch, consider this: missing just a few of the market’s best days can have a dramatic effect on your long-term returns.
The key isn’t guessing when to invest, it’s staying invested long enough for your portfolio to benefit from compounding over time.
When markets dip, it’s natural to feel nervous. But often, the biggest rebounds come shortly after the sharpest declines. Staying disciplined keeps you positioned to participate in those recoveries.
Growth of $1,000 Invested from Jan. 1, 2000 to Dec. 31, 3024
While the S&P 500 gets most of the attention, it represents just 1 country and 500 companies. The global market, by contrast, includes 47 countries and more than 8,500 companies.
By diversifying globally, investors open themselves to a wider range of opportunities — across different regions, sectors, and currencies — which can smooth out volatility and uncover new sources of return.
You can’t control the direction of the market, inflation, or interest rates. But you can control how you respond. Staying focused on costs, diversification, and your long-term plan gives you a better shot at success.
When emotions run high, it’s easy to make decisions based on fear or excitement. A trusted financial advisor helps keep you grounded, ensuring your investments align with your goals, not the headlines.
Markets will always have winners and losers. But successful investing isn’t about chasing what’s hot. It’s about building a plan that stands the test of time.
At EmVision Capital Advisors, we help clients build portfolios rooted in evidence, designed for real-life goals, and guided by the principles of long-term discipline and diversification. Because being healthy, wealthy, and wise isn’t about luck — it’s about strategy.
Questions? Don't hesitate to reach out.
James Artale is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through EmVision Capital Advisors, LLC are separate and unrelated to Commonwealth. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network. Registration as an Investment Adviser does not imply any level of skill or training.
Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.
1. Dimensional's Pursuing a Better Investment Experience