Sure, stocks and bonds -- and just about every financial asset -- aren't cheap.

Even so, as I wrote a few years ago, there's never been a better time to be an individual investor. I'm old enough to remember when trading a small stock could cost 4% to 5%. Mutual funds charged 8% commissions -- sometimes even to reinvest your dividends. Annual fund expenses often exceeded 2%.

Tax rates were far higher, grinding down investors' returns. From 1971 through 1995, analyst James Garland estimated, taxes took away 47% of the typical stock fund’s performance.

Nowadays, if you shop wisely, all those costs are close to zero, and you can defer today's lower capital-gains taxes by trading as seldom as possible.

That isn't all. Wisdom is more widely available than ever and, often, free as well. It costs nothing to read Warren Buffett's annual letters or to learn from many other great investors. Twitter is full of good insights if you tune out the noise. As I wrote four years ago, when it comes to investing, "the blessing for which I’m most grateful is the unlimited ability to learn free of charge from those who are wiser and have come before us."

As my colleagues Mike Wursthorn and Gunjan Banerji pointed out this weekend, Tesla Inc.'s shares went into overdrive the past couple weeks. On Nov. 16, S&P Dow Jones Indices announced that it would add the electric-car manufacturer to the S&P 500 on Dec. 21, forcing countless professional investors to buy the stock.

Since Nov. 16, Tesla's stock is up 39%; the S&P 500, 0.4%.

This is remarkably reminiscent of how Yahoo! Inc. behaved when it was added to the S&P 500 two decades ago. On Nov. 30, 1999, S&P announced that it would include Yahoo in the index one week later. In the ensuing five trading days, the stock went up 64%, including 24% in a single day. By Dec. 31, Yahoo had gained 103% in a month.

The big boost from being added to the S&P 500 didn't last. Yahoo shares fell 86% in 2000, another 41% in 2001 and 8% more in 2001.

Tesla could avoid that fate, of course. But its white-hot shares should remind investors of something important. As I pointed out in my Nov. 20 column, what people often regard as a systemic bubble is often confined to a few industries or even just a handful of companies.

“There is usually a subset of stocks that is driving the market, and this gives the perception to investors that ‘the market is overvalued,’” says John Turner, co-author of Boom and Bust: A Global History of Financial Bubbles, an excellent new book on several centuries of market manias.

Facebook, Amazon, Netflix, Microsoft, Apple and Google parent Alphabet make up what many investors call the FANGs and some call the FANMAG stocks.

As of Nov. 17, the Wilshire 5000 index, a broad measure of the U.S. market, was up 14.6% for the year. Take away the six FANMAG stocks and the other 3,499 stocks in the index were up 9.6%.

And 57% of all the stocks in the index were down for the year, according to Wilshire Associates Inc., which maintains the benchmark. The median stock in the index fell 3.68%, meaning half had returns even lower than that.

So the euphoria in today's stock market is focused on very few stocks, as it often is.

Long ago, a relative handful of hot investments also drove the market up and down. They were called "fancy stocks," presumably because they caught the fancy of amateur speculators.

During the 1840s in the U.S., merchants and other members of the middle class began trading stocks avidly, and popular guidebooks about speculating on Wall Street were published. Railroads were the FANG stocks of the day, and a huge boom in their shares in England was echoed in the U.S. Even after it crashed in the mid-1840s, speculators continued to trade actively. The “fancy stocks,” railroads trading at huge multiples of earnings, shot up and down with enormous volatility that often wiped out amateur speculators.

In this 1849 print, a trader puffs out his chest and smirks at his paper profits on a relative handful of fancy stocks. You can see him imagining that the magic dust of newfound wealth has been sprinkled over him, with his satin vest flashing, his gaudy jewelry gleaming and his combover almost working. He doesn't even bother looking at the “Sales at the STOCK EXCHANGE” bulletin on the day’s trading he holds in his left hand.

In the sequel, a speculator has learned that getting rich quick on hot stocks is a lot easier than staying rich.

In his fury, the trader tears his hair and crushes a pamphlet called “THE ART OF MAKING A FORTUNE IN 2 HOURS.” (Such propaganda was common then, too.) The pamphlet touts the Farmers’ Loan and Trust Co., one of the first banks to binge on real-estate loans; Harlem Rail Road, whose stock was a plaything for the takeover artists of the day; and the Morris Canal and Banking Co., nicknamed “Morrison Kennel” because it was such a dog. “Fortunes have been lost and won upon its fluctuations,” pamphleteer William Armstrong wrote about Morris in 1848.

I once defined a bull market as "a period of rising prices that leads many investors to believe that their IQ has risen at least as much as the market value of their portfolios. After the inevitable fall in prices, they will learn that both increases were temporary."

It's always been easy, whenever the market's gains have come from a handful of stocks that you happen to hold, to fall prey to that illusion. Diversify and stay humble!

Be well and invest well,

Jason

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Here are some of the best things I found over the past week outside The Wall Street Journal:

• ESG or socially responsible investing is like betting on technology and against energy with noisy data, says analyst Nicolas Rabener
• Too few stocks dominate too many emerging-market indexes, argues Acadian Asset Management (h/t @bpsandpieces)
• Bill Brewster's podcast with hedge fund manager Dan McMurtrie has some jargon, but lots of great insights
• The management consulting firm McKinsey recommended paying rebates for Oxycontin overdoses, reports the New York Times
• A hypothesis can be a liability when you're trying to make new discoveries, two scientists contend
• One expert is rarely more knowledgeable than the crowd, suggests this history of Wikipedia in the New Yorker
• Friedrich Engels, co-author of The Communist Manifesto, liked investing in stocks and bequeathed a portfolio that would be worth millions today

Here are some of the best things I found recently in The Wall Street Journal:

• Jon Hilsenrath and Nick Timiraos's profile of former Federal Reserve chair and likely Treasury secretary Janet Yellen brings her nerdiness to life
• Companies and governments have issued a record-shattering $10 trillion in debt this year, shows Frances Yoon
• Georgia Wells explains how a few TikTok amateur video stars outflanked the Trump administration's efforts to shut the company down in the U.S. 
• A program to pay jobless benefits during the pandemic has left workers below the poverty line in 70% of states reporting, say Paul Kiernan and Sarah Chaney Cambon
• Bob Hagerty's obituary for former Zappos.com Inc. CEO Tony Hsieh is full of his innovations, like giving new hires a month's pay if they quit
• Rachel Feintzeig explains how to shape up the ergonomics of your home office (thanks for explaining the footrest, Rachel!)
• Everybody's inundated with enough Thanksgiving leftovers "for an army," reports Erin Ailworth

Have a question you'd like me to answer? Want to weigh in on what you just read? Got a tip on something that I or my colleagues should investigate? Itching to tell me I'm wrong about something? Just reply to this email and I'll see your note. Please include your name and address.

The only worse humiliation would be making an error and trying to hide it. Our readers are so smart, no error is too small to escape their notice.

Case in point: After my Back in Business column on the history of videoconferencing came out on Nov. 13, a voicemail came into our reader comment line (888-410-2667) from someone named Ethan.

There was a mistake in the article, he said. In Stanley Kubrick's movie 2001: A Space Odyssey, the video call from space to Earth wasn't made from the Discovery One craft, as I had written; it was made from Space Station 5.

I called back. A woman picked up and, when I asked to speak to Ethan, said she was his mom. He couldn't come to the phone because he was in school.

Ethan Pelletier is 13 years old.

Nevertheless, the hawk-eyed eighth-grader spotted a mistake that I, and countless other readers -- including several retired scientists at Bell Labs -- had missed. (I had watched a clip from the movie, but it hadn't included the name of the spacecraft, and I mistakenly concluded it was Discovery One. 🤦)

His mom said Ethan likes to try to find errors when he reads the Journal. "This is the first time" he found one, he told me. "I like space movies, I guess. I really like 2001. I saw the movie a few months ago, I guess this summer, so I noticed [the error] right away. Discovery One wasn’t the space station, and that’s where he made the call from."

Ethan's favorite class in school? "History," he says. "That's the subject we really learn stuff in."

What does he like best about reading the Journal? "Our old newspaper was just about things happening in our town. The Wall Street Journal is about all kinds of things, so it's easier to find something interesting to read about."

We're happy to have you as a reader, Ethan, and thanks for making me watch 2001 all the way through this time.

Mistakes happen, but after a while you’ve gotta stop making ‘em twice.

— Allen Iverson