My friend Donna owns plenty of shares in Apple stock. Her portfolio is worth about $200,000. It’s the only stock market investment that she owns. Last year, I suggested that she diversify. But she had fallen in love with Apple. The stock had made her bucket loads of money. She expected buckets more to come.

But the tide turned red. On April 27th, Bloomberg reported that Apple was the Dow Jones Industrials worst performing stock since its induction into the index, just over one year ago. In the 12 months ending May 12th, 2016, Apple’s stock fell nearly 27 percent. That compares with a 0.37 percent gain for the S&P 500.

I’m not bashing Apple. It’s a great company. But in 2012, it became the biggest company in America (Google claimed the title in February). Market cap leaders usually turn into stinkers after taking the top spot. Research Affiliates’ Robert D. Arnott, Jason C. Hsu and John M. West found that between 1926 and 2006, the ten biggest stocks in the U.S. underperformed the average American stock by 2.9 percent the subsequent year. After three years, they lagged by 11.1 percent; after five years, by 17.7 percent; and after 10 years they were 29.4 percent behind the S&P 500.

During the 81-year study, the largest 10 companies had never, as a group, outperformed the S&P 500 in the years that followed. On average, 70 percent of them were beaten by the average U.S. stock.

That study ended in 2006. I wanted to see how the 10 biggest stocks in 2006 have performed since then. Results appeared consistent with the study. As a group, the ten largest companies got thumped by the U.S. market. Just three of the former top 10 market cap leaders (Chevron, Ford and IBM) beat the S&P 500’s 94.5 percent gain between April 17, 2006 and May 12, 2016.

Market Cap Leaders: April 17, 2006
Performance To May 12, 2016

Market Cap Size Rankings (April 17, 2006) Total Gain To May 12, 2016
Exxon Mobil (WMT) +85.9%
Wal-Mart +79.3%
General Motors (GM) -3.55%
Chevron (CVX) +144.7%
Ford Motor (F) +115%
Conoco Philips (COP) +28.5%
General Electric (GE) +25.2%
Citigroup (C) -90.69%
American International Group (AIG) -94.33%
International Business Machines (IBM) +122%
Vanguard S&P 500 +94.5%

Rob Arnott and his team at Research Affiliates also found that sector leaders underperform as well. For example, the top firm in the automotive industry, oil industry or retailing clothing industry usually underperformed after they became their sector’s market cap leader. In the U.S., 59 percent of market cap leaders underperform their sector in the year ahead. In the decade that follows, two thirds of them underperformed by an average of 3.7 percent each year.

In 2012, Research Affiliates’ chairman Rob Arnott and his colleague Lillian Wu published a report titled, The Winners Curse: Too Big To Succeed? They found that the biggest stocks in other countries also underperformed their respective markets after reaching their lofty perches.

But why?

Market cap monsters have bulls eyes on their chests. Top competitors aim to take pieces of their action. Statistica.com shows the growth of the Smartphone industry. This is Apple’s playground. However, lesser-known firms (in green) are shipping an ever-increasing percentage of phones to the global market.

Global Smartphone Shipements
2007 to 2015 by Vendor (in million units)

The statistic deptics the total smartphone unit shipments worldwide by vendor from 2007 to 2015. In 2014, Samsung's global smartphone shipments amounted to 318.2 million units.

Why Are Apple’s Shares Down Almost 27%?
Source: Statistica.com

Market cap leaders are huge. Their size makes them less flexible. Their internal rivalries can create inefficiencies. And their new innovations don’t move the corporate needles as easily as they would with smaller companies.

This brings me back to my friend, Donna. Her entire portfolio is in Apple stock. It’s down 27 percent over the past 12 months. She’s tempted to hold on. But she shouldn’t make decisions based on where her stock has been or where it might be headed. Instead, she should diversify.

That means building a portfolio of low-cost stock and bond market index funds. Investors shouldn’t tie their future to any single stock. That lesson should double for a market cap leader.

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and The Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat.