There's a rather unique situation occurring at around present Dow price levels that anyone who is encountering difficulties in deciding how much to invest into stocks for the first time might like to consider.
From http://en.wikipedia.org/wiki/Dividend_yield general Dow High/Low price values considered to occur at 3.2% and 8% dividend yield levels respectively. Also from that same page Maximum historical yield = 15% (1932) and minimum = 1.4% (2000).
A 4.56% yield on a 7000 Dow = $319 indicated dividend value
Which implies price ranges of Dow=2126 for 15% yield, 22800 for 1.4% yield, 3987 for 8% yield and 9968 for 3.2% yield.
If we stochastic either the 3987 to 9968 price range or the 2126 to 22800 price range against the current 7000 Dow price level then both result in around a 25% value being indicated.
If we use a proportional ladder on those both of those price ranges then both indicate around 50% stock exposure being indicated.
As the stochastic measure doesn't proportion very well the proportional ladder is generally the better choice of indicator. Which implies that a new AIM account started with the original classic AIM settings of 50/50 stock/cash will likely serve well in the forward time direction.
For reference here's the Ladder for the larger 15% yield down to 1.4% yield price range, which has been set to a $100,000 assumed available investment fund amount.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.