There are 2 types of investment policy, for institutions and individuals. I will only focus on individual investment policies as most of us are individual investors.
There are 2 classes of security buyers, the defensive investor and the aggressive or enterprising investor.
Defensive investor
Defensive investors are those who should place their chief emphasis upon the avoidance of any serious mistakes or losses and their second emphasis upon freedom from effort, annoyance, and the necessity for making frequent investment decisions.
Their portfolio should be divided into 2 parts between a 75%-25% stocks and bonds or 25%-75% depending largely on the subjective feeling of the investor.
The defensive investor may properly do his common stock purchasing through the medium of investment-fund shares or diversify in a list of leading common stocks, purchased at a reasonable price level.
Enterprising investor
The distinguishing feature of individuals in this class is their willingness and ability to devote time and care to the selection of sound and attractive investments. The enterprising investor may take calculated risk at times if he is convinced that his chances of profit sufficiently outweigh the hazard of loss.
The enterprising investor need not be a full-fledged security analyst in his own right. He may depend on others for detailed analysis, and for ideas and advice as well. But the decisions will be his own, and in the last reckoning he must rely upon his own understanding and judgment. The first rule of intelligent action by the enterprising investor must be that he will never embark upon a security operation which he does not fully comprehend and which he cannot justify by reference to the results of his own study and experience.
The endeavor to make money in securities is a business undertaking, and it must be conducted in accordance with business principles.
An enterprising investor may follow the simple 2 part policy of the defensive investor with respect to some portion of his funds, and employ the remainder to more aggressive operations. There is no single pattern for the latter. He may endeavor to buy in low markets and sell in high markets, in accordance with the age-old principle of shrewd investment. He may try to select companies that have unusual prospects for long-term growth, making sure he is not paying too much in advance for these favorable possibilities. Or he may place his prime emphasis upon the purchase of "bargain issues" which are selling considerably below their true value, as measured by reasonably dependable techniques.
My conclusion
The individual investor should be both enterprising and defensive when investing. Defensive in not speculating and to avoid serious mistakes. Enterprising in investing in your own circle of competence and having a margin of safety in the purchase of common stocks. I believe that enterprising investors should be 100% in stocks and not diversify.
Formula-timing Plans
The investor automatically does some selling of common stocks when the market advances substantially, and some repurchasing or original purchasing when the market has a significant decline.
Dollar Averaging
An increasing amount of favorable attention in recent years has been directed toward the comparatively simple idea of placing the same amount of money in the same stock, or group of stocks, in successive months, quarters or years. In a period of wide fluctuations in stock prices, dollar averaging will show better results than the method of purchasing a fixed number of shares each year regardless of price.
The real implication of dollar averaging is that investors should be wary of putting more money in stocks at higher prices than they did at lower prices--which is a common failing --and that they should never let a lower price level scare them away from buying.
There are 2 classes of security buyers, the defensive investor and the aggressive or enterprising investor.
Defensive investor
Defensive investors are those who should place their chief emphasis upon the avoidance of any serious mistakes or losses and their second emphasis upon freedom from effort, annoyance, and the necessity for making frequent investment decisions.
Their portfolio should be divided into 2 parts between a 75%-25% stocks and bonds or 25%-75% depending largely on the subjective feeling of the investor.
The defensive investor may properly do his common stock purchasing through the medium of investment-fund shares or diversify in a list of leading common stocks, purchased at a reasonable price level.
Enterprising investor
The distinguishing feature of individuals in this class is their willingness and ability to devote time and care to the selection of sound and attractive investments. The enterprising investor may take calculated risk at times if he is convinced that his chances of profit sufficiently outweigh the hazard of loss.
The enterprising investor need not be a full-fledged security analyst in his own right. He may depend on others for detailed analysis, and for ideas and advice as well. But the decisions will be his own, and in the last reckoning he must rely upon his own understanding and judgment. The first rule of intelligent action by the enterprising investor must be that he will never embark upon a security operation which he does not fully comprehend and which he cannot justify by reference to the results of his own study and experience.
The endeavor to make money in securities is a business undertaking, and it must be conducted in accordance with business principles.
An enterprising investor may follow the simple 2 part policy of the defensive investor with respect to some portion of his funds, and employ the remainder to more aggressive operations. There is no single pattern for the latter. He may endeavor to buy in low markets and sell in high markets, in accordance with the age-old principle of shrewd investment. He may try to select companies that have unusual prospects for long-term growth, making sure he is not paying too much in advance for these favorable possibilities. Or he may place his prime emphasis upon the purchase of "bargain issues" which are selling considerably below their true value, as measured by reasonably dependable techniques.
My conclusion
The individual investor should be both enterprising and defensive when investing. Defensive in not speculating and to avoid serious mistakes. Enterprising in investing in your own circle of competence and having a margin of safety in the purchase of common stocks. I believe that enterprising investors should be 100% in stocks and not diversify.
Formula-timing Plans
The investor automatically does some selling of common stocks when the market advances substantially, and some repurchasing or original purchasing when the market has a significant decline.
Dollar Averaging
An increasing amount of favorable attention in recent years has been directed toward the comparatively simple idea of placing the same amount of money in the same stock, or group of stocks, in successive months, quarters or years. In a period of wide fluctuations in stock prices, dollar averaging will show better results than the method of purchasing a fixed number of shares each year regardless of price.
The real implication of dollar averaging is that investors should be wary of putting more money in stocks at higher prices than they did at lower prices--which is a common failing --and that they should never let a lower price level scare them away from buying.
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