deally, you buy stock or points, up or down, for
currencies at its lowest individual stocks, or industrial
price and sell at its groups, or the market as a
highest. whole.
Practically speaking, you do the
On what seems to be no
best you can between these discernible evidence, they will
unpredictable extremes.
mutter, "Well, I think the
For, as you will see, the low market's going to fall out of
does not become apparent until bed," and, sure enough, within a
your stock begins to rise above week there is a 9 or 10 point
it, the high is not established reaction. Yet newcomers may also
until your stock begins to drop acquire this skill with
away.
surprising speed.
Although all of us could wish
Since judgment is a subjective
it otherwise, no bells, no quality, there are no firm rules
flashing lights, no 21-gun for applying it. But there are
salutes ever mark the bottom or generalities that can begin to
the top.
define objectives and delimit
Timing your stock areas of choice. And there are a
transactions, therefore, is number of techniques which
perhaps the most delicate element attempt, more or less
of investment, the decision successfully, to better the
requiring the keenest judgment average results obtained from
and the surest touch. Experience trying to calculate timing
helps, although success is not arbitrarily.
necessarily proportional to it.
Most professionals will tell
Veterans of the market, men who you, right off, not to try for
have been buying and selling for the extremes. The surest way to
30 or 40 years, sometimes seem to miss tops or bottoms is to wait
have a sixth sense about turning for that last extra point of
gain, that one more point of be well rid of the dog.
drop. Usually, an investor is
The correctness of these
considered to have done very well decisions cannot be judged in the
if he buys or sells within 5 abstract. They depend, first, on
points of the limit on a your objectives (See Chapter 3)
moderate-to-wide swing, within a and on how closely or
point or two over a narrow satisfactorily you have realized
range.
them. And they depend on your
Another way of looking at the analysis of the several
ideal objective is to reverse it: dimensions of highness and
try to avoid selling at the low lowness involved.
or buying at the top. This may
Buying for income is
seem to be superfluous advice, relatively easy. The indicated
but both have happened many times dividend divided by the current
when emotion entered heavily into price will give the yield in
judgment. Buying near or at the percentage terms. If the yield
top is a temptation when a stock suits you, and investigation
has been rising swiftly and suggests that it is likely to be
steadily and the investor is maintained, the price is right,
eager to get aboard. The top, whether it is in the high,
after all, is only relative.
middle, or low range for the
New tops may be within reach year.
which will make the current one
The problem of the
seem a reasonable buying level. buyer-for-income in recent years,
Selling near or at a low is of course, has been the fact that
tempting when a stock has slid a rising market has reduced
downward and the holder has yields to some very uninspiring
become disenchanted with it. The levels. The average yield of 10
impulse is to sell out, take the big oils in the first quarter of
loss, avoid further trouble, and 1959 was 3 per cent. For five
chemicals it was 2.24 per cent. crucial. Somehow you must
For seven steels it was 3.85 per determine how many more points
cent. Only the better railroads above the current price your
were around 5 per cent, as a stock is likely to go, and
group. whether this will be a
Strictly on an income basis, satisfactory profit, considering
the investor would do better at that possibly 25 per cent of it
the savings bank than in oils and will go for taxes.
chemicals, and might be
All rises must be predicated
considered to have missed his on earnings, or the expectation
market in these categories. The of earnings. Take, for instance,
choice then is whether to argue a stock selling at 50 and paying
himself into accepting 3 or 3.5 $2. This is a 4 per cent yield,
per cent (or 2.2 if he wants which, we'll say, is about
G.E., 1.5 if he wants Dow) in a average for this market this
sought-after category, whether to year.
switch categories, or whether to
Now, news gets out that it is
ignore the market until possible that the company will
conditions are more to his earn $6 per share by year's end.
liking. There may also be a Since a 50-per cent payout is the
temptation to jump into a stock general practice, a dividend rise
that for some reason is still to $3 is indicated.
yielding 5 or 6 per cent,
Naturally, there will be a
although it would be foolish to small rush toward the stock and a
do so without determining why it rise in the market price,
has maintained a high probably to 75, or the new
price/dividend relationship when equivalent of 4 per cent.
everything else is low.
This is the simplest sort of
If the objective is capital cause-and-effect relationship, so
gain, timing becomes more simple, in fact, that it
practically never happens just meaningless, and where perhaps
this way. If prices reacted even their growth potential has
exclusively on good or bad been completely discounted.
dividend news or expectations,
Still, these extremities were
the market would be far more more marked when stocks generally
static than it is. Still, were yielding 5 and 6 per cent.
earnings and the benefits there Now that so many yield 3 and
from that shower down on the under, the growth specials do not
stockholder are the basic premise seem so unreasonable at less than
of stock activity.
2.
The biggest complicating
If you are trading shares or
factor is the general absence of Forex you can also benefit from
hard information. It's rare that software that can help you time
a jump in earnings can be your purchases and sales for
positively pin-pointed, or maximum profit.
pin-pointed before a market rise
has taken effect. As a result,
most investors have to contend
with a vast range of other type="text/javascript">
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