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Indexing at Dock Street

One year ago the market crashed—who sold and who didn’t?

Simply buying a broadly based stock index rather than a portfolio of individual stocks is a rational plan. But there’s a catch.

Experience suggests that investment success can be defined as avoiding the mistake of selling at the worst possible moment. And the stock market makes it very easy to sell.

Contrast this with a business owner–large or small. During a crisis a business owner is much less likely to sell even if he could find a buyer. Psychologically, we think owning a portfolio of stocks is closer to the mental state of the sole business owner that of the stock market indexer. 

We think the selling mistake is more likely if you are indexing since you only have the stock market to believe in. 

Having lived through numerous downturns we believe investors are more likely to hang onto individual stocks than a basket of stocks when the going get rough. 

It is clear that long-term business ownership is the primary wealth creation engine. 

Most of us are not entrepreneurs so we don’t have the advantage of Bill Gates, or Steve jobs or Jeff Bezos or Phil Knight. The stock market allows us to partner with entrepreneurs who were willing to hang on to their businesses rather than sell out at an early stage. (all four of these owners could have sold)

So what do we mean by “Indexing at Dock Street”? We own the two companies that dominate stocks indexes world-wide (MSCI and S&P Global). Each one collects fees from the Mutual Funds and Exchange Traded Funds (ETFs) that mimic the indexes they own. They are toll booths for all index investors.

When the crisis hit exactly one year ago, hanging on was the right tactic in the short term. And we think it’s the right strategy long-term.

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. 

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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.

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