 How You Can Put Investment Formulas To Profitable UsePublished Date: 2005-10-21 02:28:28 WorkOnInternet.com
The older man gave him a blunt response. "Sell to the sleeping point," he said. This answer should be taken with a grain of salt, but in essence it makes good sense. Neither the young man nor the elderly sage knew exactly where the market would be headed, but they did feel that it was uncertain enough to be considered risky. The older man's advice was a sort of compromise between acknowledged risk and justifiable concern. Translated into somewhat more orthodox investment terms, the advice meant: "Sell enough of your stocks so that a market collapse won't destroy you, but keep enough so that if your fears turn out to be groundless, and the market rises, you'll still profit to some extent; in the meantime, get some sleep." You might think that the older colleague should have given the younger man more precise advice. But the inevitable uncertainty of the market means that there is never any single course of action that is "the right one." Moreover, the young investor wasn't asking to be told just what to do. Rather, he wanted some general advice about how to approach his professional duties without losing precious sleep. From this point of view, the older man's advice is perfectly appropriate. Finding The "Sleeping Point" In a real sense, investment formulas should be designed to help you in the same way that the old man's advice helped his young friend-they inject an element of caution in your investing when caution seems advisable, they reduce the provision for caution when risks seem relatively low, and permit you to benefit from rising prices for common stocks. A situation prescribed by an investment formula works automatically, mitigating risk and enabling you to sleep soundly. To emulate the young man in the story above, pick a good investment formula and follow it. But don't expect a formula to tell you everything you need to know. You must pick the specific formula as well as the precise stocks. You will need to tailor the formula to your own financial circumstances, your personality, and your risk tolerance. And because formulas are flexible, you can tailor one to fit you perfectly. Although formulas are designed to give unhedged and unambiguous indications for action, the investor should not feel that he is therefore giving up all personal control over his investments when he adopts a formula, since he selects it himself to fit his own requirements. A formula does not try to tell you what to do-it merely helps you do what you are already doing more profitably. Here's what I mean: an investment formula can't specify which stocks to buy. Anyone interested in formulas is probably savvy enough to know this for him- or herself. But formulas help ratchet up the professional quality by which you manage your portfolio It supplements your extant knowledge of stocks with such information as when to buy and how many to own. With a formula, you simply get more professional results. After accumulating vast experience working in the financial centres of London and New York Rebecca Dajarda is now the inspiration behind Fair Yield Investing. To discover more about the world of investing visit http://www.fyinvesting.com
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