In the early years of the stock market rise that began in 1949-50 considerable interest was attracted to various methods of taking advantage of the stock market's cycles. These have been known as " Formula Investment Plans."
The essence of all such plans-except the simple case of dollar averaging-is that the investor automatically does some selling of common stocks when the market advances substantially .
In many of them a very large rise in the market level would result in the sale of all common-stock holdings ; other provided for retention of a minor proportion of equities under all circumstances .
This approach had the double appeal of sounding logical and conservative and of showing excellent results when applied retrospectively to the stock market over many years in the past . Unfortunately , its vogue grew greatest at the very time when it was destined to work least well .
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