Order and Chaos

by | May 15, 2018 | General

Dealing with the apparent chaos of the stock market

Stock investing is an intensely psychological game. Short-term price movements create stress and a constant desire to understand why the market did what it did today. For most people the stress of watching the value of a portfolio fluctuate daily or hourly is simply too high a price to pay for the opportunity offered to stock investors.

To relieve the stress, stock investors attempt to discover order underneath the chaos of violent price movements. Strangely, it is more important to believe that order can exist in the market than it is to find the very best model. This belief in an underlying foundation can result in reducing stress and preventing emotional responses to market fluctuations.

Here at Dock Street we believe that owning growing businesses is the best way to combat this stress. Others adopt different strategies–technical analysis, value investing, theme investing, etc. 

One thing is certain—switching from one strategy to the next is a recipe for disaster. 

So the “order” that we find in the market is simple: growing profits in a business that produces extraordinary returns on the capital invested. Belief in this particular order is what keeps our wits about us preventing panic and, hopefully, euphoria.

Right now we are being highly rewarded for the strategy we employ. Inevitably, this will be followed by a period when our type of stocks go out of favor. We can’t promise that our methods will work every year, but we do promise to stick with what we know and what has worked for us over time.

Best regards,

Daniel A. Ogden

Dock Street Asset Management, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. You should not assume that any discussion or information contained in this letter serves as the receipt of, or as a substitute for, personalized investment advice from Dock Street Asset Management, Inc.

It is published solely for informational purposes and is not to be construed as a solicitation nor does it constitute advice, investment or otherwise.

To the extent that a reader has questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional advisor of their choosing.

A copy of our Form ADV Part II regarding our advisory services and fees is available upon request.

Our comments are an expression of opinion. While we believe our statements to be true, they always depend on the reliability of our own credible sources. Past performance is no guarantee of future returns.