It’s harder than ever for stock investors to beat an index fund because of what has become a “Winner Take All” economy in which relatively few large players are dominating the market–and such companies are increasingly hard to find. This according to a recent article in MarketWatch.

Related: More Investors are Using ETFs to Mitigate Risk

Over the past year alone, the article reports, the number of publicly traded U.S. corporations has dwindled by more than 100 to a total of less than 3,500. It cites the most recent example of Sears Holdings which “some speculate is on the verge of bankruptcy. If Sears goes out of business, it would be just one of a long line of companies ceasing to exist.”

The “Winner Take All” economy was a phrase coined by Dartmouth University engineering professor Geoffrey Brown in response to the increasing percentage of corporate profits that come from the top 100 U.S. firms. Data shows that, in 1975, that percentage was 48.5%, growing only slightly (to 52.8%) by 1995. By 2015, research shows, the number has surged to a whopping 84.2%.

Here are the takeaways for investors:

  • The average U.S stock is “riskier” because, unless it’s one of the few earning the lion’s share of corporate profits, it will be “scrambling for crumbs along with the other 3,000+ firms that are not among the economy’s winners.”
  • “Diversification is essential,” unless you know which companies the winners will be.
  • Even a well-diversified portfolio that owns dozens of stocks, the article concludes, could “still lag the market if it doesn’t own all the top profit generators which dominate the economy,” making indexing is a good alternative.

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