Archive · 27 Jul 2026
Doing Nothing Strategy Beats Hyperactive Investing
A recent study by Hendrik Bessembinder looked at how different investment strategies perform over time.
The study found that simply holding a diversified portfolio without making changes (a 'do nothing' strategy) can outperform more active investing strategies.
Equal-weighted portfolios, where each stock has the same weight, did better than value-weighted portfolios, where larger companies have more influence.
Over 55 years, $1 invested in an equal-weighted portfolio grew to $678, while the same amount in a value-weighted portfolio grew to $361.
The study also found that narrow portfolios, which focus on just a few stocks, often underperformed the broader market.
The largest stocks have done well recently, but historically, broader portfolios have performed better.
The main takeaway is that broad diversification doesn't mean sacrificing returns and that passive investing can be a strong strategy for long-term wealth creation.
Equal-weighted portfolios outperformed value-weighted portfolios over 55 years.
The mean 1-year return for equal-weighted portfolios was 14.02% compared to 12.69% for value-weighted portfolios.
Narrow portfolios underperformed the S&P 500 index more often than not, especially over longer periods.
The largest stocks accounted for 38% of the S&P 500 index as of mid-2026.
Broad diversification in passive investing matched the S&P 500's performance over the full period.
- Who
- Hendrik Bessembinder
- What
- A study on the performance of 'do nothing' portfolios versus active investing strategies.
- When
- 1971-2025
- Where
- United States (S&P 500 index)
- Why
- To evaluate the long-term performance of passive investing strategies compared to active investing.
Proponents of Active Investing
Advocates of Passive Investing
Portfolio Performance
Proponents of Active Investing
Active investing allows for better control and potential higher returns through strategic buying and selling.
Advocates of Passive Investing
Passive investing, particularly in equal-weighted portfolios, has shown superior performance over long periods.
Diversification
Proponents of Active Investing
Active investing can focus on high-performing stocks, potentially outperforming the market.
Advocates of Passive Investing
Broad diversification in passive investing reduces risk and matches market performance over time.
Rebalancing Impact
Proponents of Active Investing
Active rebalancing can enhance returns by adjusting to market conditions.
Advocates of Passive Investing
Equal-weighted portfolios with fixed allocations perform better due to systematic rebalancing.
- Study Period
- 1971-2025
- Equal-Weighted Portfolio Return
- $1 to $678 in 55 years
- Value-Weighted Portfolio Return
- $1 to $361 in 55 years
- S&P 500 Index Return
- $1 to $344 in 55 years
- Mean 1-Year Return (Equal-Weighted)
- 14.02%
- Mean 1-Year Return (Value-Weighted)
- 12.69%
- Mean 1-Year Return (S&P 500)
- 12.64%
- Largest Stocks' Market Share (2026)
- 38%