Diversification, low fees, and time equals free money

Put all your money in one industry and 30 years later you might have 50× — or barely your money back. Spread it across many industries and the wild swings temper significantly. The chart below plays this out on real returns: it grows $10,000 from 1995–2024. The faint grey band is the full range any single industry landed in. Drag the slider to invest in more industries, and watch the bold line — your portfolio. The plot keeps reshuffling which industries you hold every half-second, so you can feel how much the outcome rides on luck when you hold a few, and how little when you hold many.

That shrinking cloud in the plot above is the the thing to look at, but can be hard to track with all the shuffling. The chart below holds it still and charts it over different numbers of industries held. It shows the range of 10-year outcomes depending on how many industries are held (each size simulated over hundreds of random 10-year windows and industry picks). Notice how fast the bad outcomes become rare as you diversify over just a few industries, while the median (the middle line) barely budges. The red dashed line shows how significantly low-seeming (e.g., 1%) fees reduce the median outcome, which compounds over time and is the main reason why insisting on holding low-fee (e.g., 0.1%) index funds is important.

Diversification: the spread shrinks fast at first — even a handful of industries removes most of the gut-wrenching downside — while the median barely moves, so you give up little expected return for a lot less risk. Fees: the red line sits below the median no matter how well you diversify, and the gap compounds over time. That gap is the core reason low-fee index funds are hard to beat after costs. Data: Ken French Data Library, 30 Industry Portfolios, 1995–2024. Illustrative; past performance isn't predictive.