Everything else about 2020 felt off, so why not the stock market, too?

The messy, upside-down past year provided many examples of political, social and health issues that made many people eager to turn the calendar to 2021. Before we shift our perspective to the future, let’s add a financial conundrum to the list of 2020 head-scratchers.

Charles Schwab provides financial services for over $3 trillion in bank, brokerage and retirement accounts. One of Schwab’s services assigns ratings to individual stocks. Schwab’s analysts and quantitative models review the financial health and future prospects of publicly traded companies and assign a letter grade — A, B, C, D, F.

Schwab assigns A ratings to the 10 percent of companies (roughly 300) that appear positioned to “strongly outperform” the broad U.S. stock market. The F ratings apply to the bottom 10 percent of companies expected to “strongly underperform”. C-rated stocks comprise the middle 40 percent and B and D ratings take 20 percent each.

Schwab’s Center for Financial Research designed the methodology to evaluate stocks on growth, quality, sentiment, stability and valuation, also incorporating investor expectations for each stock.

Going back to 2002, measuring all 52-week periods over that time, Schwab’s ratings system has resulted in performance that you would intuitively expect. The companies rated A have the highest returns. The B-rated companies perform a step lower than A, C-rated companies below B and on down the line. The average 52-week performance for all A-rated stocks was 15.22 percent (total return, including dividends). Stocks rated F gained 5.85 percent.

Of course, 2020 did not follow convention. It was like “The Bizarro Jerry” episode of Seinfeld where everything was backward. A-rated stocks for the 52 weeks ending Dec. 28 had average performance of -0.46 percent. F-rated stocks over the same period averaged a gain of 56.69 percent.

Averages can be misleading. They eliminate the extremes in a range of outcomes and overlook much of the broader story that led to the average. In this case, the F-rated stocks in 2020 were dominated by the 2,821 percent return of Novavax, a vaccine developer. Plug Power, which is involved in hydrogen fuel cells, gained nearly 1,000 percent and Tesla gained 700 percent.

On the other end, A-rated companies like United Airlines (-50.07 percent), Wells Fargo (-41.93 percent) and Xerox (-34.09 percent) struggled. Other, less-recognizable A-rated companies fared even worse.

All the effort that goes into evaluating the attractiveness of stocks and predicting the future is imprecise at best and, in years like 2020, counterproductive. Many F-rated stocks in 2020 featured poor financial records (low or no profits, high stock prices, or both) but were well-positioned for the COVID era. Many A-rated stocks had the opposite experience.

Difficulty picking winners from individual stocks is nothing new. Arizona State University professor Hendrik Bessembinder evaluated 26,168 stocks that were publicly-traded in the U.S. from 1926 through 2019. Bessembinder’s research found that “the largest returns come from very few stocks overall — just 86 stocks have accounted for $16 trillion in wealth creation, half of the stock market total, over the past 90 years. All of the wealth creation can be attributed to the thousand top-performing stocks, while the remaining 96 percent of stocks collectively matched one-month treasury bills.”

The top 10 historical wealth creators were Apple, Microsoft, Amazon, Alphabet and IBM among tech stocks, Exxon, Johnson & Johnson, Walmart, Berkshire Hathaway and Proctor and Gamble outside of tech. But they haven’t contributed persistently and in the next year or 10 years they could be replaced by new leaders, some currently unheralded.

If only 4 percent of publicly traded stocks generated all the meaningful returns historically, that is the equivalent of 120 stocks out of the current 3,000 (roughly) available in U.S. markets generating all the gains. When professional ratings services sometimes are way off trying to identify stocks with the best prospects, can you expect to do better? As Capt. Miller (Tom Hanks’ character) says in “Saving Private Ryan,” “It’s like trying to find a needle in a stack of needles.”

Of course, you don’t have to own individual stocks. You can invest in more diversified funds that own lots of stocks. That will position your portfolio to earn more market-like returns without taking excess risk in search of the booming winners. This likely makes sense for the core retirement-centric money of most people. But it can be tempting to seek the budget-changing returns of a breakout performer.

No matter how you invest, it is important to understand that one-year outcomes are a short-term anomaly and not especially useful for long-term financial planning.

If you think long-term about risk, the range of potential outcomes for any investment, and how you can increase your savings rate so that your investments don’t have to do so much heavy lifting, you’ll likely build financial security over time.