FORMULA INVESTMENT PLANS HELP YOU SPECULATE CAREFULLY

Speculation is a risky business.  The allure of big gains brings with it a significant chance of sizable losses.  Formula investment plans are a way to help investors monitor and guide their speculation with systematic strategies that can reduce risk and maintain steadier returns.  Before you can effectively use one of these plans, you must choose an amount or percentage of your portfolio to devote to speculation.  This is an important decision, not to be made lightly.

You should now be able to define what a formula investment plan is, explain constant-dollar and constant-ratio plans, and understand the advantages and disadvantages of using these plans. You also may be interested in reading the related tutorial on dollar cost averaging.