VORTEX AIMing

[Conrad]

Some AIM History. . .Part 2

The essence of my AIMing Paper was to start with the DCA method as an example of a periodic investment technique with a $ 100/month purchase of shares:

Month/Price/No.Shares
1.......10......10
2.......14......7,14
3.......10......10,00
4.......8.......12,50
5.......6.......16,67
6.......8.......12,50
7.......10......10,00

The obvious result here is that when the price peaks at 14 one only gets 7,14 shares and when the price returns to the average of 10 the value of the equity package at 14 is reduced to 71,40 and that is a loss of 28,6% over a relatively short period!

I demonstrated that this loss due to buying at high prices of a volatile equity is a bone of contention in the DCA Method!

In contrast when the price has dropped to 6 one gets 16,67 shares for his $ 100 instead of 10 and when the price returns to 10 the value of that cheap package has increased to 166,70. . a whopping 66.7% profit!!! This is the great advantage of the DCA Method. The objective is, I made it clear, to eliminate the Disadvantage and to capture the Advantage of DCA.

A slight change in the investment technique would increase the profit significantly. I suggested first that when the price rose to above the average of 10 the investor should not buy any shares but keep the $ 100 in Reserve. Then next month if the price of 10 would return he could buy $ 200 worth of shares!!! He would be on even keel. . .not having lost anything relative to the price of 10. Alternatively, I pointed out, instead of buying for $ 200 worth at 10 he could wait till the price dropped to 8 and then buy $ 300 worth of shares. . . he would get 37,5 shares at a low price and when the price returned to 10 he would have a value of 375 of that package. The benefit of that strategy would be obvious to any reader. Alternatively if the investor would have waited for the price to drop to 6 he would have $400 to buy at 6 -------> 66.667 shares!!!!! . . . and when the price goes back to 10 he would have a package worth 666,67!!!!! In my original presentation I added up the profits for several complete cycles ro show the improvement relative to the DCA, and that was clearly demonstrated.

The profit potential of this technique is obviously much greater than for spending $ 100 every month irregardless of equity price, and any kid would understand it. Having achieved that I pointed out the next possible improvement: The possibility that when the price hit 14 instead of not buying the investor could Sell a package of shares worth $100!!!! . . .Sell High. . . .and he would sell only 100/14=7,14 shares, instead of buying only 7,14 shares, and he would have $ 100 extra to spend if the price drops to below 10. . .He then would, for example, have $ 500 instead of $ 400 to buy at the price of 6. . .500/6 = 83,330 shares, and at a price of 10 this package would be worth 833,33. . .a profit of 83,33 % relative to the buy @ $ 400 at 6!!!!. . .

The selling of a small package of 7,14 shares at a price of 14 has provided for increasing the profit of buying at 6 by 16,67%. . .Selling some equity at high prices is a powerful tool for leveraging the profit due to buying extra equity at low prices. This is The Magic of AIMing!

Showing this basic methodology of periodically selling high and buying low being the essence of the AIM Method made it obvious that for volatile equities in the form of Mutual Funds, or in the form of "safe" single equities, made it clear that this methodology provides great potential for realizing very high returns, relative to simple periodic buying with a constant amount each month, by which the advantage of buying low would be almost wiped out due to continued buying at high prices.

I also made it obvious that the examples were only illustrative and that the investor could adapt the examples I provided to create his own strategy for selling at high prices and buying at low prices. . .That would simply be a refinement to make the method suit the investor's style . . .he could be aggressive in doing so, or be conservative, but this method would retain the extra profit potential of the AIM strategy.

An interesting example of such a "buy & sell" strategy variation, other than Regular AIM and Vortex AIM, are the periodic Investment Plans created by Lost Cowboy. . .see The AIM Users Forum. . . in which the monthly investment values are adapted + and – in response to - and + equity prices, which would create similar “buy low & sell high” benefits that are inherrent of AIMing.

As a closing argument I asserted that it should be obvious to anyone that studies large professional investment companies that they use this periodic “buy low & sell high” strategy almost invariably: When the equity process have inceased for a period of time they sell portions of their Portfolios. . .they call this Increasing their Portfolio’s Liquid Asset Position and when prices drop significantly they buy extra equity and call it an Opportunity Buying to achieve Optimisation of the Portfolio’s Equity Positions. . . .They are careful not to call it AIMing . . .but THAT is what they do: Periodically selling of high priced equities and periodically buying low priced equities

Manno van den Berg pretended to have presented something new for Amateur Investors with his Spreading through Time idea but in fact he presented something already terribly old. He would have been better off to present any one of the AIMing Methods that are used every day by AIMers, and give credit where credit is due.