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Chapter 9. Looking Ahead: The Core Roadmap > Applying the Scientific Method

Applying the Scientific Method

The exercise in the previous section, involving the use of dividend history as a preliminary method for reducing the search for stocks, is a good example of how a fundamental program can be designed. The exclusive use of any single indicator is never recommended; even a strong record of dividend payments over a decade or more is not enough. It provides a good basis for undertaking more study, and we all have to begin somewhere.

The alternative is to either follow specific stocks based on information we are provided or simply invest in a random manner. Both of these approaches are flawed. For example, if someone tells us we should invest in the Coca-Cola Company, what is the appropriate response? If we are going to invest based solely on the advice of others without conducting our own fundamental examination, then we simply buy shares. If the irrational approach is used, we might respond by saying, “No, I like Pepsi and I can't stand Coke, so I would never buy their stock.”


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