May 31, 2019


Bodexpress at the preakness, hero to this index fund user

If you watched the Preakness Stakes, you and about 90% of all viewers were fixated on the horse named Bodexpress that threw his jockey right out of the gate and ran the entire race without him. It was an amazing feat. That’s right – no jockey steering him and whipping him with a crop around the entire 1.3-mile track.  At any point, Bodexpress could have stopped, turned around, or succumbed to side riders who tried to stop him during the contest. Bodexpress finished the entire race, and ran with the pack for nearly the entire contest. In fact, it almost appeared he would take over the lead horses before entering the final stretch.  While Bodexpress did not win, nor did he even finish in the top three, he made for a remarkable story. However, you may be asking yourself, what is the point of mentioning the jockey-less horse in one of the nation’s most prestigious races on our firm’s blog?  If you’re familiar with our past articles, you may have already guessed where this piece is going.

Bodexpress did not need to be over-managed – he had a job to do, one in which he was trained to do almost from birth. While I don’t want to overuse the analogy, I could not help but think that if Bodexpress was a mutual fund, he would have been an index fund. He didn’t need a jockey. Nor do most of your investments need a hyperactive “fund manager” dictating which stocks to buy and sell on a daily basis. Frankly, evidence states, most baskets of stocks or bonds generally do not need constant buying or selling from an expensive fund manager or “jockey,” as they are sometimes called in our industry.  Bodexpress, the horse with some of lowest odds at the start did not come in last, even sans jockey – some other horse named “Market King” came in last at the Preakness, which I find ironic for this analogical piece.

How do you think the owner of Market King felt, much less the jockey, after the Preakness? Humbled? All that steering, whipping and guiding and they still couldn’t beat a horse that was just following the track and taking his energy from the horses he ran alongside for a little over a mile. My bet is the owner, trainer and jockey of Market King felt a little foolish – not unlike an investor who has little value to show for their extra investment efforts (fretting over stock selection and market timing) when compared to the “jockey-less” index mutual fund.

Next time you watch a business show, read a book on the stock market, a personal finance magazine article extolling the virtues and benefits of picking stocks, timing markets or using derivatives, think of Bodexpress and know that sometimes in life, it just may better to ignore the conventional wisdom and leave some matters as they are meant to be. Even Bodexpress decided to take a victory lap all by himself after the race concluded.

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