Have you guys ever read this book? http://www.amazon.com/How-Make-Stock-Ma ... t+lichello
I read it several years ago when I had no money, but still had lots and lots of debt. I wish I'd scrimped and saved to figure out some way to implement his theory. The 2008-2009 time frame was the perfect example of his theory in action.
I don't know much about algorithms, but I wish I'd spent a little more time learning about them when I was still in school.
Robert Lichello's How to Make 1,000,000
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George the original one
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jacob
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No, this isn't timing.
It's value-averaging around a "mean" that has a 10% growth rate. The problem here is how to manage the cash position. If things are going up, you'll end up with a lot of nonperforming cash. If things are going down, you might not have enough cash to meet the buy amounts. The correct cash allocation is set by choosing the 10% correctly, however, that's not easy since it has to be known in advance.
It's value-averaging around a "mean" that has a 10% growth rate. The problem here is how to manage the cash position. If things are going up, you'll end up with a lot of nonperforming cash. If things are going down, you might not have enough cash to meet the buy amounts. The correct cash allocation is set by choosing the 10% correctly, however, that's not easy since it has to be known in advance.
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jacob
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Yup, then it becomes asset rebalancing where one of the assets is set to grow its allocation by 10% "annually".
In the original form the stock portion is "rebalanced" with an infinite cash allocation in that sense that the cash portion doesn't matter. If it really didn't, e.g. you'd just spend excess cash or quickly make new cash by working if needed, this idea is not bad at all, especially for a semi-retirement scenario. The only snag is that stock performance and the ability to work for money might be somewhat correlated.
In the original form the stock portion is "rebalanced" with an infinite cash allocation in that sense that the cash portion doesn't matter. If it really didn't, e.g. you'd just spend excess cash or quickly make new cash by working if needed, this idea is not bad at all, especially for a semi-retirement scenario. The only snag is that stock performance and the ability to work for money might be somewhat correlated.
I am going to implement this. I've been reading the users page and the comments on the Hub Page posted above. I found this template: http://www.aim-users.com/AimBareS.xls
I played with paper trading this about 15 years ago, but lost interest. After reading others doing this inside their 401k, I think I am going to try it with my index fund with a portion of my portfolio.
I'll post the results here periodically.
I played with paper trading this about 15 years ago, but lost interest. After reading others doing this inside their 401k, I think I am going to try it with my index fund with a portion of my portfolio.
I'll post the results here periodically.
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George the original one
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I need to go back and read the book again. I bought it in 1998, but I do still have it.
Here are some quick #'s I am thinking about based on a quick reading of the AIM Users site tonight:
4/3/13 Initial Investment Date - MM/DD/YY
14,871 Initial Investment - Dollar$
123.06 Initial Stock Price - $$/Sh
20 Initial Investment - Percent Cash %
2 Starting Minimum Trade - Number of Shares
200 Starting Minimum Trade - Dollar$
5 Starting Buy Safe %
5 Starting Sell Safe %
The numbers above represent a Vanguard Index Fund that is available in my 401K plan. My plan is to check it on the 1st and 15th of the month going forward.
Here are some quick #'s I am thinking about based on a quick reading of the AIM Users site tonight:
4/3/13 Initial Investment Date - MM/DD/YY
14,871 Initial Investment - Dollar$
123.06 Initial Stock Price - $$/Sh
20 Initial Investment - Percent Cash %
2 Starting Minimum Trade - Number of Shares
200 Starting Minimum Trade - Dollar$
5 Starting Buy Safe %
5 Starting Sell Safe %
The numbers above represent a Vanguard Index Fund that is available in my 401K plan. My plan is to check it on the 1st and 15th of the month going forward.
I read the book about that many years ago--still have it here---and attempted the program though I was not really in a position to do it right due to a lack of cash at the time. It's very compelling and convincing. I'll look forward to your posts.
It works best in volitile markets, i.e. lot's of buys and sells.
It also works better on higher beta stocks and funds. Again, lots of swings in the stock prices giving you plenty of buy/sell signals.
It works best in volitile markets, i.e. lot's of buys and sells.
It also works better on higher beta stocks and funds. Again, lots of swings in the stock prices giving you plenty of buy/sell signals.
JeanPaul,
Are you familar with the algorithm that Mr. Lichello developed that is discussed in his book? I am wondering how you have reached the conclusion that it's a scheme?
Are you aware that there have been mutual funds and financial service companies that have actualy used a very similar algorithm to manage investment portfolios?
Have you heard about "high speed trading" at all? It is really quite similar albeit on an individual investor level.
"Those who are put off by the title of Mr. Lichello's book usually won't take the time to understand the math." - Tom Veale
Google "Tom Veale AIM". It will reveal that there is a real tangible strategy involved. It's really a risk management tool and is far from "quick".
And finally, here is a discussion about the "math" behind the strategy on Motley Fool: http://boards.fool.com/aim-software-164 ... sort=whole
Are you familar with the algorithm that Mr. Lichello developed that is discussed in his book? I am wondering how you have reached the conclusion that it's a scheme?
Are you aware that there have been mutual funds and financial service companies that have actualy used a very similar algorithm to manage investment portfolios?
Have you heard about "high speed trading" at all? It is really quite similar albeit on an individual investor level.
"Those who are put off by the title of Mr. Lichello's book usually won't take the time to understand the math." - Tom Veale
Google "Tom Veale AIM". It will reveal that there is a real tangible strategy involved. It's really a risk management tool and is far from "quick".
And finally, here is a discussion about the "math" behind the strategy on Motley Fool: http://boards.fool.com/aim-software-164 ... sort=whole
I have been looking at some charts tonight. For most of the stocks I follow, things have been going very well for several years. McDonalds, Nike, Wal-Mart, Pfizer, Kinder Morgan have all been on a role for awhile.
If I wanted to use the AIM strategies for any of these stocks, this may be the time get ready for a pull back by accumulating cash.
I can buy Ford in my 401K, but haven't for several years. Timing Ford stock hasn't worked for me to this point. I sold the biggest majority of my Ford stock at $15 and only bought back twice for very small amounts.
Maybe I should try AIM in my 401K with some amount of Ford stock.
If I wanted to use the AIM strategies for any of these stocks, this may be the time get ready for a pull back by accumulating cash.
I can buy Ford in my 401K, but haven't for several years. Timing Ford stock hasn't worked for me to this point. I sold the biggest majority of my Ford stock at $15 and only bought back twice for very small amounts.
Maybe I should try AIM in my 401K with some amount of Ford stock.
How about stocks that didn`t go well?
I tested "Deutsche Telekom". It started at 14,57€ 11/1996 went up to 84€ in 01/2000 and went back to 16,42€ in 02/2002. At this point I`m out of cash and got 100€ less than buy and hold. The nexts month it gets still worse as the stock drops more.
I didn`t count interest and fees, but that doesn´t change much. Fees would eat up interest.
Maybe I did something wrong, but I can´t see how this works out as long as you´re not sure your stock will rise in long term. Or as long as you haven´t got infinte cash.
I tested "Deutsche Telekom". It started at 14,57€ 11/1996 went up to 84€ in 01/2000 and went back to 16,42€ in 02/2002. At this point I`m out of cash and got 100€ less than buy and hold. The nexts month it gets still worse as the stock drops more.
I didn`t count interest and fees, but that doesn´t change much. Fees would eat up interest.
Maybe I did something wrong, but I can´t see how this works out as long as you´re not sure your stock will rise in long term. Or as long as you haven´t got infinte cash.
@lazyboy I agree Deutsche Telekom is an ugly chart for AIM. Without doing a lot of detailed research I could see that the company has had mixed financial results and definitely struggled mightily in 2008.
I don't think AIM is a substitute for investment research and an understanding of basic financial analysis. The declining revenue, big adjustments to income, and pitiful cashflow results overall would probably be good indications that this company has had it's share of difficulties. Hindsight is always 20/20, but sometimes it's best to cut your losses and run if all the #'s start going against us.
This company is a good example too for not putting all your eggs in one basket.
I personally would not look to telecom as a good candidate for my personal investing. It's capital intensive and technology dependent. Technology (or lack of it) can bite a company big time.
I don't think AIM is a substitute for investment research and an understanding of basic financial analysis. The declining revenue, big adjustments to income, and pitiful cashflow results overall would probably be good indications that this company has had it's share of difficulties. Hindsight is always 20/20, but sometimes it's best to cut your losses and run if all the #'s start going against us.
This company is a good example too for not putting all your eggs in one basket.
I personally would not look to telecom as a good candidate for my personal investing. It's capital intensive and technology dependent. Technology (or lack of it) can bite a company big time.
So this is basically a martingale right?
https://en.wikipedia.org/wiki/Martingal ... _system%29
Risking over 2% per trade leads to failure for most traders... I'm too cowardly to risk more than .5% myself.
https://en.wikipedia.org/wiki/Martingal ... _system%29
Risking over 2% per trade leads to failure for most traders... I'm too cowardly to risk more than .5% myself.
@JohnnyH I am not an expert about Martingale, nor AIM, but Lichello does discuss a concept in his book that sounds very similar to the Martingale description. Lichello called it "Double Dollar Averaging". The AIM strategy is not the same as "Double Dollar Averaging". To me, the AIM strategy is really more of a risk management technique. Someone with more knowledge of algorithms might be able to explain the mathematics behind the Lichello theory in greater clarity than I.
In his book Lichello describes the strategy as a way of removing emotion from the decision making process. I don't think you can ever remove emotion completely from investing. In my personal opinion, removing emotion completely could be potentially perilous.
I haven't used it yet, but AutomaticInvestor has a free tool available on it's website that helps identify good AIM investing candidates. I'm going to play around with it a little bit tonight. http://www.automaticinvestor.com/freesoftware.html
High is the number of times (expressed as a percentage) that the price, over the 2 year historical period, was at least 17% higher than the 26-week moving average.
Low is the number of times (expressed as a percentage) that the price, over the 2 year historical period, was at least 17% lower than the 26-week moving average.
Total is simply the High plus the Low rating and is used to calculate the Total Volatility of the equity.
I suspect the Freeware may be out of date. So far out the ones I've typed in Ford (F) has come up with the most volatility I can find. But I haven't spent more than 5 minutes with it so far.
In his book Lichello describes the strategy as a way of removing emotion from the decision making process. I don't think you can ever remove emotion completely from investing. In my personal opinion, removing emotion completely could be potentially perilous.
I haven't used it yet, but AutomaticInvestor has a free tool available on it's website that helps identify good AIM investing candidates. I'm going to play around with it a little bit tonight. http://www.automaticinvestor.com/freesoftware.html
High is the number of times (expressed as a percentage) that the price, over the 2 year historical period, was at least 17% higher than the 26-week moving average.
Low is the number of times (expressed as a percentage) that the price, over the 2 year historical period, was at least 17% lower than the 26-week moving average.
Total is simply the High plus the Low rating and is used to calculate the Total Volatility of the equity.
I suspect the Freeware may be out of date. So far out the ones I've typed in Ford (F) has come up with the most volatility I can find. But I haven't spent more than 5 minutes with it so far.
Re: Robert Lichello's How to Make 1,000,000
@Jacob:
"In the original form the stock portion is "rebalanced" with an infinite cash allocation in that sense that the cash portion doesn't matter. If it really didn't, e.g. you'd just spend excess cash or quickly make new cash by working if needed, this idea is not bad at all, especially for a semi-retirement scenario. The only snag is that stock performance and the ability to work for money might be somewhat correlated."
Jacob, if the equity portion of the portfolio was invested in a dividend paying stock...couldn't you put up the stock, borrow on margin the amount of cash necessary to meet the "rebalance" amount...and pay the margin interest from the dividend proceeds? i.e. I believe this is to your point that the cash amount of the portfolio doesn't matter to the strategy.
"In the original form the stock portion is "rebalanced" with an infinite cash allocation in that sense that the cash portion doesn't matter. If it really didn't, e.g. you'd just spend excess cash or quickly make new cash by working if needed, this idea is not bad at all, especially for a semi-retirement scenario. The only snag is that stock performance and the ability to work for money might be somewhat correlated."
Jacob, if the equity portion of the portfolio was invested in a dividend paying stock...couldn't you put up the stock, borrow on margin the amount of cash necessary to meet the "rebalance" amount...and pay the margin interest from the dividend proceeds? i.e. I believe this is to your point that the cash amount of the portfolio doesn't matter to the strategy.