In his 2005 shareholder letter, Warren Buffett shared a neat little parable about a wealthy family called the Gotrocks. It’s a sharp jab at the investment advisory industry — and it clearly struck a chord with Vanguard founder Jack Bogle, who later gave it a starring role in The Little Book of Common Sense Investing.
Here’s the gist:
The Gotrocks family owns every public company in America. Naturally, they’re doing quite well — collecting dividends, watching their wealth quietly compound, and splitting the spoils evenly. No one’s trying to outfox anyone else. Life, as they say, is good.
But then the Helpers show up.
These are the brokers, advisers, and assorted financial whisperers who sidle up and say, “You could be getting more. Let us help rejig your portfolio with a smarter strategy.”
Seems reasonable. Some of the family’s holdings are middling businesses, and even the good ones can get pricey. Surely a little bit of clever pruning and savvy timing could boost returns, right?
And so, the trading begins. Shares are shuffled, positions trimmed, portfolios “optimised” — each transaction clipping a little fee for the Helpers. The taxman gets his slice too. Soon enough, a few Gotrocks realise they’re not exactly naturals at this, so they hire professionals to do the fiddling for them. For another fee, of course.
Some outperform. Most don’t. And, in aggregate, the family’s overall slice of America’s economic pie starts to shrink. The more they trade, the more they pay. The Helpers thrive. The Gotrocks…not so much.
Buffett’s moral: for investors as a whole, returns decrease as motion increases.
Bogle, of course, was making the case for passive index investing. Which, frankly, is the best option for the vast majority of investors. But the parable still offers a lesson for those of us that fancy ourselves as stock pickers.
Most notably, over-trading is hazardous to your wealth.
It’s not just the fees and taxes (though those will slowly but surely bleed you out) it’s the opportunity cost. Chasing short-term gains means cutting yourself off from the full force of long-term compounding. You’ll never ride a multi-bagger if you’re selling every 20% pop.
The other great lesson is beware “helpers”. Not all of them, mind you. There are some honest, skilled folks in the business who genuinely add value. But they’re rare. Most are rent seekers, peddling activity as intelligence, and monetising your fear and greed.
Their pitch is always the same: do something. Tweak the portfolio. Time the market. React. But markets don’t pay you for effort. They pay for results. And often, the smartest move is no move at all.
Sure, there are moments that call for action. But more often than not, the best thing to do is… nothing.
For stock pickers, the Gotrocks parable is a nudge to be deliberate. If you’re going to diverge from the index, do it with purpose. Know what you own. Know why you own it. And don’t let every market tremor or shiny narrative shake your conviction.
Above all, keep your ears plugged when the Helpers start singing.
Strawman is Australia’s premier online investment club.
Members share research & recommendations on ASX-listed stocks by managing Virtual Portfolios and building Company Reports. By ranking content according to performance and community endorsement, Strawman provides accountable and peer-reviewed investment insights.
Disclaimer– Strawman is not a broker and you cannot purchase shares through the platform. All trades on Strawman use play money and are intended only as a tool to gain experience and have fun. No content on Strawman should be considered an inducement to buy or sell real world financial securities, and you should seek professional advice before making any investment decisions.
© 2025 Strawman Pty Ltd. All rights reserved.
