Forecasting

During 1956 the peak price reached on a share of some common stocks listed on exchanges was as much as ten times as high as it had been three years earlier, in August 1953. Even in some broadly diversified investment companies, the price of a share was more than doubled in those same three years. Over a longer time, the fluctuation has been great er. Back in 1942, just after the United States entered World War II, the price of a share of a diversified fund was one fifth or one sixth as much as at the peak of 1956.

Obviously an investor’s timing can make an enormous dif ference in how many shares his money buys and, consequent ly, in how much income he receives. And his timing of selling can cause just as much difference in the amount of cash he receives for his shares. This chapter discusses the timing prob lem as it confronts a buyer or seller of shares in a broadly diversified fund, whose value naturally varies more or less in line with a stock-market index. The question of when to switch from this stock to that stock is another story, not covered here. Certified Financial Planner - Read More.