The progression from constant-ratio formulas to variable ratios is completely logical. Once an investor understands the principles of constant-ratio planning, he might well wonder about the feasibility of adding some flexibility to a formula by increasing the ratio of common stocks when the market is low, and cutting back when the market is high, thus maximizing purchases of stock at low prices and minimizing risks at high levels.

This is precisely what the variable-ratio plans attempt to do. Understanding the objective is easy attaining it is somewhat less so. There have undoubtedly been more variable-ratio plans invented than any other type, and a high percentage of them have wound up in the ashcan. Some worked extraordinarily well over a period of time, and then became worthless because of changing conditions in the market. Others were obsolete almost as soon as devised. But variable ratios are by no means dead. On the contrary, at the present time there are probably more formulas of this type in use than any other.

Unfortunately, most of these plans can be used with difficulty, if at all, by the average investor. A good many of them have proved themselves to be of little value, and some of the others are either based on information which is not made public or require more work than most investors care to expend. However, they are presented here for the sake of completeness and to provide the reader with some possible sources of ideas which he may be able to apply to his own investing.

The major snag that variable-ratio inventors run into is the difficulty of deciding what are “low” and “high” markets. The whole success of the technique depends on a more or less successful advance charting of market levels, although it is a general assumption about the future range of prices that is made not a precise prediction. Stocks - Read More.