A.I.M. "In Depth" Q&A

[OldAIMGuy]

LD-AIM Tutorial by Ray.............................

I thought I would jump in here and tell how I go about putting together a brand new LD-AIM program. Let me know if I am doing this wrong or if you think I can do it better.

First of all, I would decide how much money I wanted to spend on my first Buy. Let’s say that I wanted my initial minimum Buy to be approximately $1,500.

Next I would decide on what settings I wanted to initially use. My initial Sell SAFE would by 0%. My initial Buy SAFE would be 10% and my Minimum Transaction would be 10% of the Program Value (not 10% of the stock value---big difference).

I would use Toofuzzy’s handy calculator which shows that my Portfolio Control would initially be approximately 18,500 to have my first initial Buy to be approximately $1,500.

Let’s say that I wanted to sell out of my LD-AIM program after 3 program sales.

Let’s say that I wanted to buy an S&P 500 Index ETF….symbol SPY. Current price is around $133.15 as I type this. I would then put the following numbers into Toofuzzy’s calculator.

http://www.aim-users.com/calculator.htm

18,507.85 – Program Portfolio Control (139 Shares X Current $133.15 price).

139 Shares – Initial # Program Shares (rounded up)

0% -- Sell SAFE

10% -- Buy SAFE

10% -- Minimum Purchase of Stock Value

The results show that I would sell 14 shares (rounded up) at $147.94.

Since my Portfolio Control remains 18,507.85 I would then enter 125 shares (139 initial shares minus my first sell of 14 shares) into the calculator.

The results show that I would sell 13 shares (rounded up) at $164.51.

Again, my Portfolio Control remains 18,507.85. I would then enter 112 shares (125 shares minus my second sell of 13 shares) into the calculator.

The results show that I would sell 11 shares (rounded down) at $183.61.

So, now I have my 3 Sells of 14 shares, 13 shares and 11 shares for a total of 38 shares.

I would now make my purchase of SPY by buying 38 actual shares @ $133.15 for a total purchase of $5,059.70 (plus commissions).

Now then, in my LD-AIM program I am running it with an initial Portfolio Control of 18,507.85 with an initial total of 139 shares.

Since I actually purchased only 38 shares this means that I have 101 shares left over in my LD-AIM SPY program (139 Program Shares minus the 38 Actual Shares in the initial purchase). Those 101 leftover shares are now my VIRTUAL SHARES. These 101 VIRTUAL SHARES never change throughout the life of this particular Program.

I then set up my worksheet with some of the following columns.

38 – Actual Shares

101 – Virtual Shares

139 – Total Actual and Virtual Shares

18,507.85 – Portfolio Control initial value

$18,505.85 – Program stock initial value

$5,059.70 – Actual Initial Cost of stock shares

I am now running an LD-AIM program

If I were a great picker of stocks or funds and SPY’s value went straight up after I purchased it and never declined enough to make any purchases, then I would sell 14 of my 38 actual shares @ $147.94. My next sell would be 13 of my remaining 24 actual shares @ $164.51. My last sell would be my 11 remaining actual shares @ $183.61.

$6,229.50 – Total Amount of these 3 Sells (less commissions)

$5,059.70 – Actual Cost (plus commissions)

$1,169.80 – Profit (ignoring commissions)

23.12% - Return on this LD-AIM program

(By the way, I did the above using a hand held calculator, so I am not guaranteeing that my numbers are correct).

At this point I still have 101 Virtual Shares. SPY now has a current value of $183.61 (my last Sell price). The Portfolio Control is still at 18,507.85. I can now do one of several things.

I can continue tracking SPY and make a purchase of 10 shares if the price of SPY declines down to $152.70 (my first purchase price using the current settings of a 10% SAFE and a 10% Minimum Transaction amount).

Or, I can forget about SPY and use my proceeds to begin another LD-AIM program with another stock which I believe is more undervalued.

Or, I can take the proceeds to Las Vegas and lose it all.

I am sure you guys can think of other things to do with the proceeds.

LD-AIM advantages: Can run several different programs (3 or more) with that $18,507.85 and diversify much better rather than spending all of the $18,507.85 initial Program Value on only one purchase of SPY and running only one Program.

LD-AIM disadvantage: Sell out of all actual shares purchased…that is, if one considers that to be a disadvantage (which I personally don’t).

Anyway, this is how I run any LD-AIM programs I might set up.

Best regards,

Ray