Survivorship Bias and XEQT: Why You Only Hear About Winning Stock Picks

I have a coworker – let’s call him Dave – who will not shut up about NVIDIA.

Every Monday, without fail, Dave brings up his NVIDIA shares. At lunch. In the hallway. During meetings that have nothing to do with investing. “You see NVIDIA this morning? Up another three percent. I told you guys to buy it back in 2021.” And Dave did tell us. He bought NVIDIA around $150 pre-split, and by 2024, he was up something like 800%. A stock-picking savant, by his own account.

Here’s the thing about Dave, though. Dave doesn’t talk about the other stocks.

I found out months later – through a mutual friend who’d seen Dave’s actual portfolio – that Dave also bought Peloton near its peak. He owned Zoom at $400. He had a position in Carvana that lost 90% of its value. He’d dabbled in some small-cap lithium miner that went to basically zero. In total, Dave’s “genius” portfolio had actually underperformed a basic index fund over the same period.

But Dave never mentions those. Not once. As far as his audience is concerned, Dave is NVIDIA guy. And NVIDIA guy is a genius.

You probably know a Dave. Or maybe you’ve been browsing Reddit, where every other post is someone showing off a 400% return. Nobody posts screenshots of the $5K they turned into $800 on the previous three trades. Nobody shares their full portfolio.

This isn’t dishonesty, exactly. It’s something more subtle and more dangerous. It’s survivorship bias – the cognitive error that warps how you see investing and makes stock picking look far easier than it actually is.

And once you understand it, you’ll never look at a stock tip the same way again.

1. What Is Survivorship Bias? (The Airplane Story You Need to Hear)

Survivorship bias is the logical error of concentrating on the things that “survived” some process while overlooking the things that didn’t – usually because the failures are invisible, forgotten, or literally no longer exist.

The most famous example comes from World War II.

During the war, American bombers were getting shot down at an alarming rate. The military wanted to add armour, but armour is heavy – add too much and the planes couldn’t fly. So they needed to figure out exactly where to reinforce.

Engineers studied the bombers that returned from missions and catalogued where the bullet holes were. The fuselage and wings were riddled with damage. The engines, cockpit, and tail, not so much. The obvious conclusion: reinforce the fuselage and wings.

Enter Abraham Wald, a statistician at Columbia University. Wald looked at the same data and reached the opposite conclusion. Don’t armour the places with bullet holes. Armour the places without them.

His reasoning was elegant: the engineers were only looking at planes that survived. The planes that took hits to the engines and cockpit weren’t in the sample – because they never made it home. The bullet holes on the surviving planes showed where a bomber could take damage and still fly. The missing holes showed where damage was fatal.

The military had been about to reinforce the wrong parts of the airplane because they were only looking at survivors. The dead planes were invisible.

That’s survivorship bias in its purest form. You draw the wrong conclusions because you’re only seeing the winners. And this exact error plays out in your investment decisions every single day.

2. Survivorship Bias in the Stock Market: The Winners Write History

Think about the companies that define “successful investing” in the popular imagination. Apple. Amazon. Google. Microsoft. Tesla. NVIDIA. These are the names that come up in every conversation about why you should pick individual stocks. “If you’d bought $10,000 of Amazon in 2001, you’d have over $2 million today!”

True. Also completely misleading.

You know what else was around in 2001? Enron. WorldCom. Kodak. Blockbuster. Bear Stearns. Lehman Brothers. Palm. Sun Microsystems. These were blue-chip darlings, recommended by analysts, held in retirement portfolios everywhere. “Safe.” “Established.” “Too big to fail.”

Every single one either went bankrupt or lost 90%+ of its value.

But nobody says, “Man, if you’d bought $10,000 of Enron in 2001…” Those stories aren’t fun to tell. They’ve been erased from the collective investing memory, leaving only the winners to create the illusion that stock picking is a reliable path to wealth.

The numbers tell a sobering story. Consider the original S&P 500 companies when the index was established in 1957. Of those 500 companies, fewer than 60 remain in the index today. The rest were acquired, went bankrupt, shrank into irrelevance, or simply disappeared. That’s an 88% failure rate over roughly 65 years.

And the S&P 500 itself has survivorship bias baked into its design. The index regularly removes underperforming companies and adds new winners. When you look at a long-term S&P 500 performance chart and think, “Wow, the market always goes up,” you’re not looking at a fixed group of companies. You’re looking at a constantly refreshed roster from which the losers have been quietly escorted out the back door.

In any given decade, roughly 40-50% of all publicly listed stocks deliver negative total returns. Not “underperform the index” – actual negative returns. The market “always goes up” because the index replaces the dead with the living. If you’re picking individual stocks, you don’t get that luxury.

3. How Survivorship Bias Shows Up in YOUR Investing Decisions

Survivorship bias isn’t just an abstract concept. It’s actively influencing your financial decisions right now.

Social Media Stock Tips

Open Reddit, Twitter/X, YouTube, TikTok, or any investing forum and what do you see? Winners. People posting their massive gains, their 10x trades, their portfolio screenshots with green numbers. The content that gets upvoted, liked, and shared is overwhelmingly positive. Why? Because nobody films a TikTok about losing 60% on a biotech stock.

This creates a wildly distorted sample. What you won’t see is:

• The person who made that trade five times before and lost money every time
• The thousands of people who made the same trade and lost
• The poster’s full portfolio, which is likely underwater overall
• The trades that were so bad the person deleted their account entirely

You’re seeing the Abraham Wald bullet holes – the winners that “survived” the curation process. The losers crashed and burned in silence.

Friend and Family Stock Stories

Dave from my office isn’t unusual. He’s normal. When people make money on a stock, they talk about it. When they lose money, they stay quiet. This isn’t deception – it’s basic human psychology. We share our wins because they make us look and feel good. We hide our losses because they’re embarrassing.

The result is that your social circle becomes an echo chamber of winning stock picks. Your brother-in-law bought Shopify early. Your friend at work caught the Tesla run. Your neighbour made money on crypto. What you’re hearing is a highlight reel, not a documentary.

Financial News and Media

Turn on BNN Bloomberg or CNBC and you’ll see segments about stocks that are surging. You will almost never see a segment called, “Here are 15 stocks that lost half their value this quarter.” Winners are newsworthy. Losers are boring. The media presents a world where picking winners appears achievable because winners are the only thing you ever see.

Investment Newsletters and Gurus

Every stock-picking newsletter advertises their hits. “We recommended NVIDIA at $150!” What they don’t mention is the 12 other recommendations that went nowhere. Some services literally close or rename after a bad run, then relaunch with a clean track record. The losers get buried. The winners get billboarded.

4. The Mutual Fund Graveyard: Survivorship Bias as Industry Strategy

Here’s where survivorship bias goes from cognitive error to systemic feature. The mutual fund industry has survivorship bias built into its business model.

A large fund company launches 10 new mutual funds. After five years, three have beaten the market, four have roughly matched it, and three have badly underperformed. What happens to the losers? They get merged into better-performing funds or quietly closed.

The result? The company advertises only the surviving funds. “Look! Three of our funds beat the market!” They don’t mention the three that were taken out back and shot.

The data on this is staggering:

• According to the S&P Indices Versus Active (SPIVA) reports, roughly 50-60% of Canadian equity mutual funds underperform their benchmark index over any given five-year period
• Over 15-year periods, that number climbs to 80-90% of funds underperforming
• And critically, approximately 30-40% of Canadian equity mutual funds that existed 15 years ago no longer exist today – they were merged or closed

That last point is the kicker. When you look at the “average” mutual fund return reported by the industry, you’re looking at the average of the survivors. The dead funds aren’t in the calculation.

Imagine a fund company that, in 2010, had 20 Canadian equity funds. By 2025, seven have been closed or merged. The surviving 13 funds show 7 out of 13 beating the benchmark – 54%, not bad! But include the dead funds and only 7 of 20 beat it – just 35%. The true success rate is almost half of what the survivorship-biased sample suggests.

This is why comparing your XEQT returns to mutual fund returns is an apples-to-ghosts comparison. The ghosts have been removed from the record.

5. Canadian Examples: The “Sure Things” That Weren’t

Survivorship bias hits especially hard when you look at the Canadian market, because Canada has had some spectacular high-profile collapses that have been quietly swept under the collective memory rug.

Nortel Networks

In the year 2000, Nortel Networks accounted for over one-third of the entire value of the TSX Composite Index. One company. A third of Canada’s stock market. Every analyst recommended it. Your parents probably held it in their RSPs. At its peak, Nortel’s market cap was over $350 billion.

Then came the accounting scandals, the dot-com crash, and the evaporation of demand. Nortel filed for bankruptcy in 2009. The stock went to zero. Tens of thousands of Canadians saw their retirement savings decimated because they’d concentrated in the stock that “couldn’t fail.”

Today, most twenty-somethings have never heard of Nortel. A company that once was the Canadian stock market has been erased from investing consciousness. That’s survivorship bias at work.

BlackBerry (Research in Motion)

Research in Motion, maker of the BlackBerry, was one of the most valuable companies on the TSX. In 2008, RIM’s stock peaked at around $150 per share. Every executive had a BlackBerry. “Who’s going to compete with them? They own the enterprise market.”

Then the iPhone happened. And Android. The stock declined relentlessly, eventually trading below $10. Investors who held RIM as their “Canadian tech champion” lost over 90%.

When people talk about Canadian tech success stories today, they mention Shopify and Constellation Software. Nobody brings up RIM. The loser has been forgotten. Only the current winners get the spotlight.

Valeant Pharmaceuticals (now Bausch Health)

Valeant was the darling of the Canadian market in the mid-2010s. The stock ran from about $20 in 2011 to over $300 by mid-2015. Fund managers who held it looked like geniuses. The business model was “brilliant” – acquire drug companies, slash R&D, and jack up prices.

Then came congressional hearings on drug pricing, an accounting scandal, and scrutiny over the company’s specialty pharmacy relationship. The stock plummeted from $300 to under $20 in about 18 months.

Today the company exists as Bausch Health, a shadow of its former self. The fund managers who once bragged about owning Valeant now never mention it. Airbrushed out of their track records.

Shopify: Survivorship Bias in Real Time

Shopify peaked at over $2,200 per share on the TSX in late 2021. Canada’s most valuable company. A national champion. A sure thing. By the end of 2022, it had fallen to under $500 – a drop of nearly 80%.

As of 2026, Shopify has recovered significantly, and the people who held through the crash are once again telling their success stories. But the investors who panic-sold at $500? Who took an 80% loss and moved on? They’re silent. Their story doesn’t get told. The narrative around Shopify has been retroactively edited to make it look like a smooth ride for anyone brave enough to hold.

Holding through an 80% drawdown requires either extraordinary conviction or extraordinary stubbornness, and most individual investors have neither.

6. How XEQT Eliminates Survivorship Bias

This is where XEQT – the iShares Core Equity ETF Portfolio – offers something genuinely revolutionary, even though it’s the least exciting investment you’ll ever make.

When you buy XEQT, you own approximately 9,000 stocks across the entire world. You own the winners. You own the losers. You own the future Amazons and the future Nortels. You own all of it.

Here’s why that matters for survivorship bias:

You Don’t Need to Pick the Survivors

With individual stock picking, you need to identify in advance which companies will survive and thrive – not just “do well for a bit,” but genuinely survive for decades. With XEQT, you sidestep the problem entirely. You own everything, so you’re guaranteed to hold every future winner. Yes, you also hold the losers – but because the index is market-cap weighted, your winners naturally grow larger while losers shrink to irrelevance.

Apple went from near-bankruptcy in the late 1990s to the most valuable company on earth? If you held a total-market index, you owned Apple the entire time. You didn’t need to “pick” it. You just needed to own the market.

The Index Does the Cleaning for You

XEQT’s underlying indices have built-in rules for adding and removing companies. XEQT naturally rotates out of declining companies and into rising ones, without you making a single decision. The Nortels and Valeants gradually shrink and get removed. The Apples and NVIDIAs grow and take their place.

You get the benefit of survivorship – owning the winners – without the risk of survivorship bias. Because you never had to choose which companies would survive.

No Highlight Reel Needed

When you own XEQT, your entire portfolio is a single line item. No stories, no cherry-picking, no Dave-at-the-office posturing. Your returns are the return of the global stock market, minus a tiny management fee. Nothing to embellish. Nothing to hide.

When someone claims to “beat the market,” remember: you’re seeing their highlight reel. Your XEQT returns, boring as they may seem, represent the real, unbiased, full-picture return of global equities. Their cherry-picked screenshot does not.

7. The Uncomfortable Truth: Most Individual Stocks Lose

If survivorship bias makes stock picking look easy, the actual data makes it look nearly impossible.

Hendrik Bessembinder, a finance professor at Arizona State University, published groundbreaking research that should be required reading for anyone considering picking individual stocks over an index fund. His findings are jaw-dropping:

• Just 4% of all listed stocks accounted for the entire net wealth creation in the US stock market from 1926 to 2019. Four percent. The other 96% collectively matched Treasury bill returns.
• More than half of all individual stocks delivered negative lifetime returns. Not “below average.” Negative. They lost money.
• The single best-performing stock in any given period contributes a disproportionate share of total market returns. Remove the top few performers and the remaining stocks, as a group, are mediocre at best.

If you’re picking individual stocks, you need to find the 4% that drive all the gains. Miss them, and your portfolio is basically a savings account with extra volatility. And survivorship bias ensures you’ll never feel like the odds are against you, because all you see are the 4% that won.

When your coworker says “just buy good companies,” they’re implicitly claiming they can identify the 4% in advance. The evidence – from decades of academic research, from the SPIVA scorecards, from professional fund managers with every advantage in the world – overwhelmingly says: no, you can’t.

Even professional stock pickers fail to beat the index the vast majority of the time. The idea that you or I, browsing Reddit on our lunch break, are going to succeed where they couldn’t is the ultimate triumph of survivorship bias over reality.

8. Practical Takeaway: What to Actually Do About It

Understanding survivorship bias is useful. But knowledge without action is just trivia. Here’s how to actually apply this to your investing life.

Stop Listening to Stock Tips

The next time someone tells you about their amazing stock pick, remember: you are seeing the planes that made it home. Ask yourself:

• What are this person’s other picks? What’s their full track record?
• Am I hearing about this stock because it already went up and is being shared retroactively?
• Would this person be telling me about this stock if it had gone down 40%?

Almost always, the answer to the last question is no. And that tells you everything you need to know.

Stop Comparing Your XEQT Returns to Cherry-Picked Stocks

You’re sitting there with your XEQT position that returned 10% last year. Meanwhile, some stock returned 150%. “Why am I bothering with this boring ETF?”

Because you’re comparing your full, honest portfolio return to a single cherry-picked winner. That’s like comparing your salary to the lottery jackpot and concluding you should quit your job and buy scratch tickets. The fair comparison is your XEQT return versus someone’s entire portfolio of individual stock picks, including the losers. In that comparison, XEQT wins the vast majority of the time.

Demand Full Track Records

If anyone – a fund manager, a newsletter, a social media influencer – claims to beat the market through stock picking, ask for the full, audited track record. Every pick. Every trade. Winners AND losers. Including the ones that were so bad they got quietly dropped from the portfolio.

You will almost never get this. And that refusal tells you everything.

Stay the Course

The hardest part of owning XEQT isn’t buying it. It’s holding it while everyone around you seems to be getting rich on individual stocks. It’s watching Dave brag about NVIDIA while you “just” own the whole market.

But you’re not missing out. You own NVIDIA – it’s in there, along with 9,000 other companies. What you’re missing is the thrill of picking winners and the story of being a stock-picking genius. Those are things you should be happy to miss, because the thrill and the story come with a price most people can’t afford.

The unsexy truth is that the investors who build the most wealth are the ones who resist survivorship bias, buy a broadly diversified index like XEQT, contribute consistently, and refuse to be seduced by the highlight reels of others.

It doesn’t make for a great TikTok video, but it makes for a great retirement.

A Simple Mental Exercise

Every time you’re tempted by a stock pick, try this: for every one success story you hear, mentally conjure five failures you didn’t hear about. For every person who bought Amazon early, there are people who bought Pets.com, Webvan, and eToys. For every Shopify, there’s a Nortel, a BlackBerry, and a Valeant. For every Dave bragging about NVIDIA, there are five investors silently nursing their Peloton losses.

You just never hear about them. And that silence is the most expensive sound in investing.

The Bottom Line

Survivorship bias is the invisible hand that makes stock picking look easy, mutual fund managers look competent, and your friend Dave look like a genius. It works by erasing the evidence of failure – the bankrupt companies, the closed funds, the losing trades nobody talks about – leaving behind only the winners to create a dangerously misleading picture of how investing works.

The antidote is disarmingly simple: own everything.

When you buy XEQT, you stop playing the survivorship bias game entirely. You own the entire global stock market – roughly 9,000 companies across dozens of countries. The winners grow in your portfolio automatically. The losers shrink and get replaced. You just show up and contribute.

It’s not glamorous. Dave will still brag about NVIDIA. You’ll still feel a twinge of envy when some stock goes to the moon.

But decades from now, when the dust settles and the full, unbiased record is tallied – winners and losers, survivors and casualties – the boring XEQT investor will have quietly built more wealth than almost everyone who tried to pick the winners by hand.

Because you can’t be fooled by survivorship bias when you own everything that survives – and everything that doesn’t.