The essence of such plans is that the investment pool shall at all times consist of two portionsemdash a defensive pool consisting of securities having relatively small price fluctuations (high-grade bonds and preferred stocks) and an aggressive pool made up of securities having considerable price volatility (mainly common stocks). As security prices rise, the defensive portion of the pool is to be enlarged relative to the aggressive segment.


We propose to reduce our common stock holdings by 10 percent when the average rises by 10 percent from this point and to add 10 percent to our common stock holdings whenever the average falls 10 percent.

If, perversely, stock prices continue to rise or fall without much interruption over a period of time, the formula plan will not work.

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