An investment strategy that calls for the buying and selling of securities according to a set formula. Both long-term and short-term formula plans exist, as well as high- and low-risk plans, but most rely heavily on previous market indicators. For this reason it is difficult to include a new issue of stock in a formula plan. Formula plans aim to eliminate personal opinions, emotions, and judgments from investing by never deviating from the formula.
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The buying and/or selling of securities according to a predetermined formula. This approach to investment decisions is intended to eliminate the investor's emotions and instead to follow a mechanical set of rules. A huge number of formula plans have been developed over the years.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.