A number one song earns two times as much as number two song. And a number two song earns two times as much as a number three song earns and so on.
All I need to do is sign up one or two consistently good bands to make my whole career. If I also sign up a bunch of one hit wonders, it's OK.
You see something similar in stocks. The big cap stocks are most likely to shoot way, way up. If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money.
It's possible that if you count the names of winners and losers, that the author is right, and there are more winners in the midcaps than the large caps.
But if you own large caps, you will own a few stocks shooting way, way up like Amazon and lots of stocks that lose a little. If you own mid caps, you might own a lot of stocks that go up a little, and only a few stocks that go down. But because of the power law, you only need to own a few stocks like Amazon in your portfolio to make more money with large caps than mid caps.
A number one song earns two times as much as number two song. And a number two song earns two times as much as a number three song earns and so on.
All I need to do is sign up one or two consistently good bands to make my whole career. If I also sign up a bunch of one hit wonders, it's OK.
You see something similar in stocks. The big cap stocks are most likely to shoot way, way up. If you invest in the next bunch down, the mid cap stocks, then historically, you would not have made as much money.
It's possible that if you count the names of winners and losers, that the author is right, and there are more winners in the midcaps than the large caps.
But if you own large caps, you will own a few stocks shooting way, way up like Amazon and lots of stocks that lose a little. If you own mid caps, you might own a lot of stocks that go up a little, and only a few stocks that go down. But because of the power law, you only need to own a few stocks like Amazon in your portfolio to make more money with large caps than mid caps.