Shell, BP, HSBC, AstraZeneca, British American Tobacco – nobody’s idea of an exciting portfolio.
Yet a study of every UK-listed stock over the past 50 years found that the top ten wealth creators, including these five, captured nearly a third of all the real wealth generated by UK stocks. Thousands of listings came and went in that time. These stayed and compounded, and also sometimes feature in the most popular stocks purchased by DIY investors.
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Which UK stocks created the most wealth?
Only three per cent of UK stocks created all the wealth. A newly published, peer-reviewed study in the Journal of Asset Management quantifies what many investors suspect but few grasp in full. Jonathan Fletcher and Michael O’Connell at the University of Strathclyde examined every stock listed on the London Stock Exchange, the Unlisted Securities Market and AIM between 1975 and 2024. Their finding: just 3.1% of those companies generated all of the market’s aggregate net wealth creation in real terms.
The names that did the heavy lifting won’t surprise anyone. Shell, BP, HSBC, British American Tobacco, AstraZeneca, Rio Tinto, GlaxoSmithKline and Unilever – dull yet dependable.
The top 10 alone captured nearly a third of all aggregate wealth created. These weren’t the stocks that made headlines; they were the ones that compounded quietly while the headline stocks came and went.
More than half of all UK stocks failed to beat Treasury Bills over their lifetimes. The median stock lost money after inflation: a lifetime real return of −13.9%. AIM, the market segment most associated with exciting growth stories and tax-efficient wrappers, produced negative aggregate net wealth of −£2.6 billion.
This isn’t a UK anomaly. Hendrik Bessembinder at Arizona State University, whose 2018 study first documented the pattern in the US, has updated his data through 2022. Across nearly a century of American equities, just 4% of stocks accounted for all $55 trillion of net shareholder wealth creation. The remaining 96% collectively matched Treasury Bills at best.
Two different markets. Two different time periods. The same conclusion: equity wealth creation has always been radically concentrated. The few carry the many.
So when only 3% of stocks generate all the aggregate wealth, today’s top-heavy indices aren’t a distortion. They reflect how markets work. And if you’re picking individual stocks, you’re betting you can identify those winners before the fact, from a pool where the median outcome is a loss.
Avoiding market concentration actually made things worse
If concentration is structural, what happens when you try to fight it? Mark Kritzman of Windham Capital Management and MIT Sloan and David Turkington of State Street Associates set out to answer that in their recent paper – The Fallacy of Concentration.
They built a dynamic strategy that reduced equity exposure whenever market concentration was historically high and increased it when concentration fell. The result: lower returns, higher risk and less than half the cumulative wealth of staying invested.
The buy-and-hold investor earned a Sharpe ratio of 0.52. The concentration-avoider earned 0.39. Both held the same average equity exposure over the full period, at 67.8 per cent. The difference wasn’t about courage or conviction. It was about fighting a feature of the market that turns out not to be a bug.
Large companies aren’t just large. They’re structurally less volatile. Kritzman and Turkington found that the biggest decile of S&P 500 stocks had annualised volatility of 19.2 per cent, compared with 28.8 per cent for the smallest. A market dominated by large companies is, counterintuitively, a calmer one.
Smith is not wrong that passive flows direct money mechanically toward the biggest stocks. That’s how cap-weighted indexing works. But whether that mechanism exists matters less than whether the concentrated index is more dangerous than the concentrated stock-picking portfolio. On that, the evidence is clear.
Buy the whole book
The Fletcher and O’Connell data leaves stock pickers with an uncomfortable question. If the vast majority of listed companies destroy value over their lifetimes, picking individual stocks looks less like a skill contest and more like a raffle. The rational response isn’t to study the tickets harder. It’s to buy the whole book.
Terry Smith, of course, would disagree. But his own record is instructive. Fundsmith returned 0.8% in 2025 against 12.8% for the MSCI World – Smith’s fifth consecutive year of underperformance.
Laith Khalaf, head of investment analysis at AJ Bell, noted that the fund has now lagged its benchmark over both five and 10 years.
Khalaf’s wider point is worth hearing too: “Fundsmith’s earlier outperformance was partly flattered by the low interest rate environment that suited Smith’s quality style. Now that tailwind has reversed, the structural headwinds facing stock pickers are harder to ignore.”
None of that reflects on Smith’s intelligence or his process. It reflects the odds, and those odds don’t bend for reputation.
Market concentration is worth understanding. It’s worth watching. But the evidence from three studies spanning two markets and close to a century of data points the same way: the risk most investors should worry about isn’t a top-heavy index. It’s a portfolio that bets against the 3 per cent carrying everything else.
For most of us, the better odds are hiding in plain sight.
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