In our last paper “The Collision of Arithmetic & Over-Optimism”, Kailash presented a compelling chart demonstrating that investor obsession with the 25 largest growth firms had driven them to record valuations. The chart below shows that the odds of picking a stock that beats the index has only been lower at the peaks of the Internet Bubble and Nifty Fifty mania. It also reveals that shortly after moments like these, the opportunity to outperform the index moves dramatically in your favor.

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