| A famous Wall Street story concerns a young man | | | | element of caution in your investing when caution |
| who was in the early stages of learning to be a | | | | seems advisable, they reduce the provision for |
| professional speculator. He had a problem, so he | | | | caution when risks seem relatively low, and permit |
| went for advice to an elderly sage noted for his | | | | you to benefit from rising prices for common stocks. |
| shrewd investment judgment. The fact was, the | | | | Moreover, once you incorporate a formula into your |
| young man said, that he had taken on quite an | | | | investment program, it works more or less |
| extensive line of stocks, but the market looked high | | | | automatically, thus allowing you to sleep nights in the |
| - maybe too high - he thought possibly his position | | | | knowledge that you are continuously hedging against |
| carried with it too many risks, and wondered if he | | | | various possibilities. |
| shouldn't perhaps sell. He was so worried about this, | | | | But just as the investment sage left it up to the |
| he said, that he couldn't sleep nights. | | | | young man to decide exactly what the "sleeping |
| The old man's counsel was simple and direct: "Sell," he | | | | point" might be in his particular case, you can select a |
| said. "Sell back to the sleeping point." | | | | formula appropriate to your own temperament, |
| Although there is no doubt that this advice smacks | | | | financial circumstances and proclivity to insomnia. As |
| of imprecision, there is a good bit of wisdom in it. We | | | | will be made clear in later pages of this book, any of |
| may fairly assume that neither the young man nor his | | | | the formulas can be adjusted to suit the needs and |
| adviser knew for sure which way the market was | | | | preferences of any investor. |
| going, but both were aware that the market was | | | | Although formulas are designed to give unhedged and |
| sufficiently shaky to cause legitimate worry. | | | | unambiguous indications for action, the investor |
| Translated into somewhat more orthodox | | | | should not feel that he is therefore giving up all |
| investment terms, the advice meant: "Sell enough of | | | | personal control over his investments when he |
| your stocks so that a market collapse won't destroy | | | | adopts a formula, since he selects it himself to fit his |
| you, but keep enough so that if your fears turn out | | | | own requirements. A formula does not try to tell you |
| to be groundless, and the market rises, you'll still | | | | what to do - it merely helps you do what you are |
| profit to some extent; in the meantime, get some | | | | already doing more profitably. |
| sleep." | | | | For example, formulas cannot tell you which stocks |
| At first glance, it may seem cynical on the old man's | | | | to buy. This book assumes that anyone interested in |
| part not to outline for his protege an exact and | | | | formulas is already a relatively sophisticated investor |
| detailed course of action. But he could not honestly | | | | and knows what kind of stocks he wants to buy, |
| guarantee that he knew exactly what action might | | | | how to select them and where to go for advice in |
| turn out to be best. Furthermore, the young man | | | | his particular areas of interest. But - by supplementing |
| didn't want someone to tell him precisely what to do. | | | | his knowledge of which securities with considerations |
| All he wanted was some help in easing the pressure | | | | of the equally important questions of when to own |
| at a critical point, and the help he got seems | | | | them and in what quantity - formulas can supply a |
| eminently sensible. | | | | valuable added dimension to his investment results |
| In a real sense, the investment formulas are designed | | | | and help put the management of his portfolio on a |
| to help you in the same way that the old man's | | | | more professional level. |
| advice helped his young friend - they inject an | | | | |