There's also the fact that the smallest company revelations are instantly disseminated over the Internet, causing swift reaction by millions of investors, particularly the institutional kind. And since the equity market is the sum of all individual stocks, it's the most diversified portfolio you can get. That's not to say the market itself isn't risky. Plenty of things can still go awry with respect to macroeconomic forces like rising interest rates, recessions, and the like. While this may seem little more than a truism, Malkiel and crew's observations have one giant implication for retail investors.
Diversification is now more essential than ever.
Our results suggest you might be exposed to much more risk than you think. Of course, there's not much you can do about the macro-market risk. Either inflationary pressures or the Fed's medicine will shake things up for a while. But if history is any guide, the overall stock market will trend upward over the long run. Either spread your bets even wider or get the heck out of the market.