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To: gdichaz who wrote (14976)	9/14/1998 12:37:00 AM
From: Jon Koplik	Read Replies (1) \| Respond to of 152472

Chaz - the reason that market timers are absolutely destined to NOT do well, whereas people who have (correctly) identified a valuable business concept that happens to be publicly traded and simply buy and hold it, is ... (and this is the one, single most important thing I learned at business school which is profound, AND relevant to real life situations) ... The distribution of stock price returns has been found (by means of analyzing data from 1926 to present) to be of a log normal distribution pattern. That's log as in logarithms. In plain English, past history has shown that if you pick many stocks (say several hundred or more), and really actually buy and hold them (like almost no one ever manages to do), then the number of stocks that fall to 1/2 of their starting value will roughly equal the number that end up at 2 times their starting value, the number that fall to 1/7 equals the number going to 7 times, the number going to 1/30 equals those going up 30 fold, etc. You and I do not deal in logarithms of dollars, we deal in dollars. The occasional big stock loser that does continue on down from 75% loser to 87.5% loser (or 90%) loser just does not matter when there should be a 4 fold winner, or a 8 fold winner, or a 10 fold winner in equal quantities, over a long period of time, with a large list of stocks. (Work out the arithmetic if you want). I graduated from business school in 1980, so I must have heard this log normal thing sometime between 1978 and 1980. I have been following stocks more or less on a daily basis since December 1974. I can tell you, from my own experience, I do believe the log normal thing (e.g., I owned America Online very early, made what I thought was a fair amount if money, quite quickly, and then got out because I thought the share price was absurdly high). Let market timers "churn themselves into butter" (a line from one of my favorite commodity trading acquaintances). If you think you are on to an excellent business, just buy some shares, and then do not let go. (Print this out; look at it once a year; and enjoy the two years of tuition you will not have to spend going to business school). Jon.