2. No increase in the proportion of funds held in common stocks.
3. A reduction in common stock holdings where needed to bring it down to a maximum of 50 per cent of the total portfolio. The capital gains tax must be paid with as good grace as possible, and the proceeds invested in first quality bonds or held as a savings deposit.
Investors who for some time have been following a bona fide dollar cost averaging plan can in logic elect either to continue their periodic purchases unchanged or to suspend them until they feel the market level is no longer dangerous. We should advise rather strongly against the initiation of a new dollar averaging plan at the late 1964 levels, since many investors would not have the stamina to pursue such a scheme if the results soon after initiation should appear highly unfavorable.
This time we can say that our caution was vindicated. The DJIA advanced about 11% further, to 995, but then fell irregularly to a low of 632 in 1970, and finished that year at 839. The same kind of debacle took place in the price of “hot issues”-i.e., with declines running as much as 90%-as had happened in the 1961
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