March 16, 2009

Day trading – For example, the sale of electric utility stocks in July or August 1959, when the general market reached a high point, would have been unprofitable,for the group as a whole continued to rise with little setback into early 1961.

On the other hand, the purchase of large amounts of Standard Oil Company of New Jersey would have turned out less profitably than that of many other stocks at what proved to be a turning point in the market; the purchase of Douglas Aircraft would have shown a severe loss two years later. In a careful study, it has been shown that during every year of the great bull market of the fifties, 20 per cent of the stocks in the portfolio composed of the Dow-Jones combined average of sixty-five stocks (industrial, public utility, and railroad) appreciated by at least 10 per cent. Frequently, 20 per cent of the stocks gained well over 40 per cent. On the other hand, at least 20 per cent of the shares chosen at random frequently fell in price over a one-year period. One observer reached this conclusion: 6 Even if the timing of purchases is excellent, the rate of return on a portfolio through price appreciation can vary widely depending on its composition. If the future continues to resemble the past, proper security analysis can lead to handsome, even generous returns.

Day trading – For example, the sale of electric utility stocks in July or August 1959, when the general market reached a high point, would have been unprofitable,for the group as a whole continued to rise with little setback into early 1961.

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