| A classic Wall Street yarn, concerning a young man | | | | young man to decide exactly what his "sleeping |
| who was in the early stages of learning to be a | | | | point" might be, you can select a formula appropriate |
| professional speculator goes something like this. The | | | | to your own temperament, financial circumstances |
| young man had a problem, so he went to an elderly | | | | and proclivity to insomnia. Any formula can be |
| gentleman noted for his shrewd investment | | | | adjusted to suit the needs and preferences of any |
| judgment, for advice. The young man had taken on | | | | investor. |
| quite an extensive line of stocks, but the market | | | | Although formulas are designed to give un-hedged, |
| looked a bit over-valued and so he was thinking that | | | | unambiguous and unbiased indications for action, the |
| his positions carried too many risks. He wondered if | | | | investor should not feel that he is surrendering all |
| he shouldn't perhaps sell. He was so worried about it | | | | personal control over his investments when he |
| that he was having trouble sleeping. | | | | adopts a formula. The reason behind this logic is clear. |
| The old man's advice was simple and direct: "Sell" he | | | | It's because each investor selects the formula that |
| said. "Sell back to the sleeping point." Although there | | | | will fit his own individual comfort level. A formula |
| is no doubt that this advice smacks of ambiguity, | | | | doesn't try to tell you what to do - it merely helps |
| there is a simple wisdom in it. We may safely assume | | | | you do what you are already doing more profitably. |
| that neither the young man nor his elder adviser | | | | For example, formulas cannot tell you which stocks |
| knew which way the market was going, but both | | | | to buy or currency to trade. |
| were aware that the market was sufficiently shaky | | | | The whole premise of using formulas is based on the |
| to cause legitimate worry. Translated into somewhat | | | | fact that those using them are normally quite |
| more orthodox investment terms, the advice meant | | | | sophisticated and that they know what kind of |
| - Sell enough of your stocks so that a market | | | | investment vehicle they are interested in, how to |
| collapse won't destroy you, but keep enough so that | | | | select them and where to go for advice in their |
| if your fears turn out to be groundless, and the | | | | particular area(s) of interest. However, by |
| market rises, you'll still profit to some extent - in the | | | | supplementing their knowledge with considerations of |
| meantime, get some sleep. | | | | the equally important questions of when to own and |
| At first glance, it may seem a bit cynical on the old | | | | in what quantity - formulas can supply a valuable |
| man's part not to outline for his young disciple an | | | | added dimension to their investment results and |
| exact and detailed course of action. But he couldn't | | | | assist in the management of their portfolio on a more |
| be honest and at the same time guarantee that he | | | | professional level. |
| knew exactly what action might turn out to be best. | | | | Along this same line, it is worth mentioning that |
| Furthermore, the young man didn't want someone to | | | | although the true purpose of a formula is to supply |
| tell him precisely what to do. All he wanted was | | | | the investor with an investment policy which is |
| some help in easing the pressure and the help he | | | | definite in its instructions at all times, you need not |
| received was clearly sensible. | | | | feel that you must follow the formula precisely in |
| How to Find the Sleeping Point | | | | order to profit from it. You cannot, of course, ignore |
| In a real sense, investment formulas are designed to | | | | it altogether if you expect to benefit from it, but |
| help you in the same way that the old man's advice | | | | you can profitably use it as a touchstone or a general |
| helped his young friend - they inject an element of | | | | guide without swearing eternal allegiance to its |
| caution in your investing when caution seems | | | | dictates. You might, for example, want to use a |
| advisable, they reduce the provision for caution when | | | | formula, but also desire to increase or decrease your |
| risks seem relatively low and permit you to benefit | | | | risks at various times for a variety of reasons. Your |
| when prices rise. In addition, once you incorporate a | | | | use of the formula will show you how far you are |
| formula into your investment program, it works more | | | | departing from your original plan and will give you a |
| or less automatically, allowing you to sleep nights in | | | | well-ordered program to come back to when you are |
| the full knowledge that you are continuously hedged | | | | ready. |
| against various unforeseen possibilities. | | | | This article may be reproduced only in its entirety. |
| But just as the investment sage left it up to the | | | | |