VORTEX AIMing

[Conrad]

The Vortex ROTAI Definition is to be changed

In Vortex AIM initially the Annual Yield for any fund has been calculated on the basis of the Time Average Investment (TAI) for the time variable inputs and withdrawals. In this the Initial Capitalization was not seen as an Investment in the equity. . .only the initial purchase of equity was considered an investment Also the cost of buying the equity is considered an investment . The basic principle of the ROTAI . . . .Return On Time Averaged Investment. . . .is very similar to the ROCAR as defined by Tom Veale and is used by AIMers to get a better feel of the real yield of their investment. . .The ROTAI specifically presents the yield on Capital at Risk. The Reserve is not considered an investment as it simply part of the investor's Back-up Assets. A Reserve only becomes an effective investment in case it is provided as security to Broker that has been given to the authority to spend the money as he sees fit or to cover for losses like they can occur in FOREX trading via a Broker.

In private investing such as AIMing the AIMer has full control over his Investment and can decide at any time NOT to Buy an equity. . .or to sell some of it. . .his Reserve is not Risk Capital until he buys equity for it. This is the fundamental basis for me using the ROTAI Yield in Vortex AIM. It has always been my principle guideline for having the investor call the shots and not let a machine take over. The Reserve in a Portfolio is not locked-into an investment.

For this reason I have decided to redifine the current ROTAI Yield Equation so that only the time averaged investments are calculated as the effective investments. The Reserve is regarded simply as a Private Buffer to buy equity up to the point that the investor is prepared to do so. Also in the past and in my book The Vortex Method I have advised Vortex AIM investors to regard the Reserve as flexible back-up money in the sense that one might add to it, or take away from it, as he sees fit, without in any way altering the equity holdings.

Recently I discovered that some time ago the ROTAI Equation had been altered to include 100% of the capitalization of the Portfolio. This means in effect that now the ROTAI works only from the point of view of the small scale inputs and withdrawals that are the time average component of the investment. . .whiping out the principle feature of ROTAI! In effect the ROTAI is now only marginally different from the simple ROI and I discovered this with managing the current Demo Run on SPY. The ROTAI yield in the Excel version I am using for Testing is ~ 18% while the Vortex Windows ROTAI shows only 6,5 %. . .which is about the same as the ROI using the $ 20000 capitalization as Investment while in effect the Time Averaged Investment is only about $ 6400!

The ROTAI Yield Equation will soon be resorted to its former glory . . .In this only equity investments, withdrawals and directly related equity components relevant to the acquisition and selling of the shares will be part of it, so that only the Capital at Risk is considered as the basis for the yield calculation.

In this it is interesting to note that for example in this scheme a dividend is considered as a negative investment. . .in effect it is a time-based withdrawal from the equity . . .it only affects the investment at the time it is received . . .In the ROTAI Equation the dividend makes the investment base smaller so that in this way the dividend as a time-based negative investment infuences the yield of the investment more realistically. Only in proportion of the time the dividend has entered the portfolio does it participate in the yield calculation

If one would simply add the dividend to the Reserve it manifests itself as simple Profit, and then the dividend amount is effectively assumed to have been paid out at the without regaqrds to when it was paid out. This inflates the ROI unfairly. In the ROTAI calculation the dividend accrues its effect only in proportion of the time it has been part of the portfolio.. . .It is more honest yield. See the example:

Profit 100 + 10 Div = 110 total profit.
The 100 profit is simply profit, assumed to have been there on Day 1 already!
Investment on Day 1 = 200
Dividend was added on Day 300 of the year with 365 days in it

ROI Method . . . . . Yield = 110/200 for 1 year = 0,55 or 55%
ROTAI method. . .. Yield = 100/{[(200*1 - 10*(65/365)]/365} = 0,5045 or 50,45 %

Because the dividend is a profit component that has been in the portfolio only for 65 days its effect is that the yield is much smaller than with the unfair ROI Method.

If you do not see this then think of the case in which de dividend would be paid out on Day 366. . . .a day after the Year End Run is evaluated. At that time there is no dividend and the ROI = 50^% just like the ROTAI would be!!!! This is the reason for using the Time Averaged Investment Method. . . .It gives an honest Yield Percentage