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From Kast:
FINALLY ready to start this week but...
I still have a few questions. I've read the AIM book and understand AIM "by the book". I'm now trying to figure out how to incorporate the Split SAFE and Vealie into my new AIM program. I have read the links on the aim-users.com website that define the concepts and give some examples.
Could use a little help in making sure I understand the following:
1. V-Wave. If I understand correctly this is an indicator that helps determine how much cash to hold when beginning a new AIM program. The last v-wave reading posted was around 52.85, so it looks like I should just start out around 50/50 in cash and holdings. After a program is underway then this indicator is used as a way of controlling the overstock of cash in a bull market, is that correct? If our cash% is at or above the v-wave then should we ignore the sell signals but change our portfolio control number by 1/2 the sell signal (normally increased by 1/2 of the buy signal)? I just want to be sure I understand this part because I'm a little unclear on this. I also have no idea how to calculate the v-wave so I'd have to rely entirely on it being posted on a regular basis in this bulletin board.
2. Split SAFE. If I'm going to be trading all Vanguard mutuals and ETFs with no commissions (through an account in Vanguard), should I just take ALL buy signals? Would you recommend a 0% Buy and 10% Sell in that scenario? The mutual funds I'll own are more aggressive and I'll trade each fund in a separate AIM account. I also will hold a couple of ETF funds (REIT and Emerging Markets). AIM "by the book" is 10% sell/buy but I'm trying to figure out how to best utilize the Split SAFE method that Tom and others have written about. Any advice on this would be appreciated.
3. Dividends. I'm still unclear on if it's better to reinvest dividends in shares or take the dividends and deposit it into the cash portion of my AIM program? I'll be trading entirely in a retirement account for now (roth and ira), so I don't know if that makes a difference?
4. Intervals. At one point Robert mentioned in his book that the AIM program might have better results if run on a 2 week schedule instead of a monthly schedule. Have any of you compared these results? What interval do you recommend for running an AIM program?
Those are the areas that I could use a little help in understanding. I have already learned a lot from you all just by reading the posts here each day. Thank you all for taking time to share experiences and wisdom.
I'm excited to make my first purchases this week and FINALLY begin my journey with AIM.
Kast
Several other AIMers offered up suggestions for Kast's questions. I've answered as follows:
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Welcome Kast and congratulations on giving AIM a try,
1) v-Wave: It's a variable indicator that relates to general market risk and the cash reserve of an AIM account for both starting purposes and also as a benchmark for where your own cash levels are with an ongoing AIM'ed investment. It's probably conservative for diversified mutual funds, less so for business sector funds and is about right for BETA 1.00 stocks. It might be a bit aggressive for IPOs and stocks with very high BETAs.
2) Split SAFE: Personally after a couple of decades of AIMing with Split SAFE I'd suggest that my article at aim-users.com be used as a reference and not gospel. During a raging bull market it may seem to be good to stage all the SAFE on the Sell side, but when the bear comes out of hibernation it complicates AIM's feedback loop to the Portfolio Control.
Today if I subtract something from the Total SAFE (buy plus sell) I take it from the Sell side only. If I want to keep SAFE at a full 20%, I normally stage all of it on the Buy side. The reason is that Cash is finite in AIM where Stock Value for selling is infinite. Almost NEVER do I let Buy SAFE drop below 10% because of feedback to Portfolio Control.
For diversified mutual funds, usually 10% Buy SAFE and zero Sell SAFE works well. However, I also use a 30 day delay between sequential buys, even on mutual funds. The more specific the fund (such as business sector funds, REITs or emerging markets) the more I add to the Buy SAFE. It's rare that I use over 20% total SAFE (Buy plus Sell). If I have an urge to use more SAFE than that, I usually then increase the value of my minimum trade instead (say 7.5% or 10% of Portfolio Control as a minimum order value).
The other reason I do this now is that I habitually use "vealies" to contain a portfolio's enthusiasm for building up too much cash. That acts as a surrogate for having a fat Sell SAFE.
3) Dividends and Distributions: You're right, in a retirement account it makes very little difference whether you take distributions in cash or shares. AIM is a very effective purchasing agent. So, it tends to be a little more efficient when buying shares than having the dividends reinvested (dollar cost averaging). This is a very subtle difference, however, and takes years to see. Also, since I use "vealies", Portfolio Control recognizes the distributions periodically during long bullish markets.
4) Frequency of Selling should be as often as AIM suggests there are profits to be taken. (assuming you aren't swimming in Cash compared to the v-Wave.) Generally I use "Good Until Cancelled, Limit Orders" for selling and size the orders as "minimum." That way, if the market comes to my price target, the trade almost always gets done whether I'm watching or not. I then recalculate the "next sell price" and enter a new GTC Limit order.
Frequency of Buying is a different story. As mentioned above, our cash reserves are finite, but our supply of equity is infinite in an AIM world (note: the LD-AIM variant can exhaust the equity side). To slow AIM's enthusiasm for spending down our reserves of cash, it's best to stage sequential buys 30 days apart. That allows us to continue buying during protracted Bear markets for a longer time. I've been using the "30 day rule" relatively uniformly for over a decade and feel it's been a major improvement considering the market turmoil we've seen in that time.
I hope this helps,
Tom
Hi Steve, I have been mostly here. About the spreadsheets, while I had a AIM spreadsheet, it was a very simple one, which I no longer have. But I don't think that you are talking about it anyway. I think that you are talking about ether the synchrovest spreadsheet or the lowhighdemo spreadsheet. Send me a email to lost_cowboy@hotmail.com I'll see what I can do.
PS: you can get a free AIM spreadsheet here.
www.aim-users.com/aimware.htm[tag]Software for use with A.I.M.
[/tag]
Take care,
Clifford
Lostcowboy---This is going to be an odd reply. I have been looking for you for a couple of years!!! Way back when, you had a spreadsheet where you made some changes to AIM. I cant remember the name of it but it allowed for monthly additions and the ability to adjust the sell percentages. I REALLY, REALLY, WOULD LIKE TO HAVE THAT SPREADSHEET AGAIN!!! Can you help me?
Thanks in advance for your time, Steve.
P.S. As I recall you had several different spreadsheets for buying and selling.
Hi Ed, first if you have not read Robert Lichello book, you need to read it. He explain's all this very well.
Second you can go to Software Products for use with A.I.M. and download a free excel spreadsheet that will show you the caculations. If you don't have MS Office, then use the free openoffice software.
Hi Ed
1) You own $10,000 in stock and $10,000 in cash
2) STOCK GOES DOWN and you have a BUY
3) INCREASE PC by 1/2 of the DOLLAR amount you bought, Share count goes up by amount you bought. CASH goes down by the amount you bought.
1) You own $10,000 in stock and $10,000 in cash
2) STOCK GOES UP and you have a SELL
3) PC STAYS THE SAME. Share count goes down. CASH goes up by the amount you sold.
It is all in the book.
The market is up now, If you are starting now I would definately start with 50% stock and 50% cash so AIM can handle a 50% drop in stock prices. The V-Wave is a good indicator of how much CASH to start with. I think it is as 54%
FOR BUY
PC - STOCK VALUE = x
x - 10% of STOCK VALUE = Y
IF Y > = to 5% STOCK VALUE then BUY
FOR SELL
STOCK VALUE - PC = X
X - 10% of STOCK VALUE = Y
if Y >= to 5% of STOCK VALUE then SELL
The APP was made with my permission. It was supposed to be free. Is it? Is it the same app that has a link from Tom's board? www.aim-users.com
Again ..... do not rely on any software till you really understand what is going on. You can use my program to see if you get the same answer. You can also copy my program to your computer.
Hope this helps
Toofuzzy
Hi Toofuzzy,
Firstly, thanks for the quick reply and your work (unfortunately it was copied to be an App).
Secondly, regarding my point 1) again. I need to clarify: after I sell some shares, I use the original PC divided by the new shares balance to calculate the new AIM Buy/Sell levels to be applied for next month. Confirm?
Same for when I buy. I need to re-calculate my AIM Buy/Sell levels based on
((PC+(0.5*cost))/(new shares amount)
Thanks
Ed
Hi ED
>>>>>
1. After you have sold some shares according to AIM Sell, do you re-calculate your new AIM Sell and Buy levels base on you new 'reduced' share position? Eg. If you started with 1,000 shares and sold 100, do you now use PoCo (original) divided by 900 shares to re-caluclate? Or do you leave your AIM Buy/Sell levels till the next adjustment date?
Could someone please post some examples of how you re-calculate AIM Buy/Sell after a Sell adjustment and a Buy adjustment?
2. Can you explain how to use AIM to control a portfolio of stocks?
3. Did you know that there's an AIM App in the Apple App store? Does it work according to Robert Lichello's work? <<<<<<
I'll work backwards
3)The app was copied from my work that I put on Tom's board www.aim-users.com
Look for the QUICK AIM CALCULATOR
Having said that, do not use it till you can do the calculations with paper and pencil (OK your allowed to use a calculator) I developed it mainly to figure out the "HOLD ZONE" so I only needed to do the calculations if I could actually do a trade. So once / month I could just look at and index card and go " OK no trade this month" and move on with my life.
2) read the book a few more times and take notes!
1) When you SELL
PC stays the same, share count is reduced, cash available increases.
When you BUY
PC is INCREASED buy 1/2 of purchase, share count increases, cash available is reduced.
Hope that helps some
Toofuzzy
AIM Formula
Hi guys, I have a few questions after reading the book. I hope you can help me clarify.
1. After you have sold some shares according to AIM Sell, do you re-calculate your new AIM Sell and Buy levels base on you new 'reduced' share position? Eg. If you started with 1,000 shares and sold 100, do you now use PoCo (original) divided by 900 shares to re-caluclate? Or do you leave your AIM Buy/Sell levels till the next adjustment date?
Could someone please post some examples of how you re-calculate AIM Buy/Sell after a Sell adjustment and a Buy adjustment?
2. Can you explain how to use AIM to control a portfolio of stocks?
3. Did you know that there's an AIM App in the Apple App store? Does it work according to Robert Lichello's work?
Many Thanks in advance.
Ed
Re: Annual Price Movement vs AIM cycles and Brownian Movement.....
Hi Clive, Going way back to the start of this "In Depth" FAQ on AIM, the first post here talks about finding the sweet spot in AIM's SAFE settings for capturing the best part of available volatility. (see http://investorshub.advfn.com/boards/read_msg.aspx?message_id=279368 )
This is using the Zig Zag pattern over a three year period to attempt to divine the best settings. Of course it's only going to be "best" for that particular time frame. I noted here that the graphs of CGNX for the latest three years do not represent the text shown.
In that example, CGNX's shorter term volatility justified smaller SAFE settings because of the larger total return even in the face of smaller "round trip" gains. This was because there was a larger %age increase in total reversals than there was a decrease in round trip profits.
Even so, such settings would only have been optimized for just that time frame. The exercise was done to point out the diminishing returns that could occur either side of the sweet spot. It was also done to show there were places of lower "technical efficiency" in trading with SAFE settings that were too low.
When SAFE is too low, we will see multiple trades on the "wrong side" of the 26 week Moving Average and possibly not in harmony with such things as W%R. Unfortunately, the last three years of stock history don't offer much in the way of use right now because of the odd nature of the time. It would be better to set the start and end dates to something more normal and look at the reversals. (note that in StockCharts.com you can pick start and end dates as long as it doesn't exceed 3 years of weekly data)
As you pointed out, it is possible to get the same results from different settings in AIM. When one has to add in trading costs, there can be a slightly better return for slightly less frequent trading with a higher round trip LIFO gain. In today's world of deep discount brokerage fees, this is only true when one's minimum trade size is such that the commission cost is statistically significant as a percent of total trade value. The larger the value of the trade, the lower the penalty of the commission cost.
Thanks for looking at this in a new and refreshing way.
Best regards, Tom
Are regular 10-20% annual gains actually feasible with using AIM by your experience?
Hi BBnvestr
Classic AIM applied to a diverse range of assets in an appropriate manner can generally achieve all-stock like rewards over the mid to longer term i.e. 10% like, in my experience.
For 20% type rewards, again in my experience, you'll need to use a variation of AIM.
Over the years I've migrated from seeking gains arising out of all three of price appreciation, income and volatility capture (zig zag trading) to predominately volatility capture only (in effect my price appreciation and income gains just counter losses, leaving just pure volatility capture as the predominant gains). Depending upon how hard you wish to push, average gains of 20% or more are viable.
I'm 50 now, and have predominately relied upon somewhat AIM (concept) like investment gains since my early 40's.
AIM stocks should also have 2 to 1 ratio on the 52 week high and low, for example if the stocks low for 52 week low was 10.00 you would want it to at least have a 20.00 high
Over the long term, the Dow has averaged 18% between year low and high (high / low).
If we partition share price movements into say 5% steps then 18 / 5 = 3.6 such 5% steps between high and low.
Brownian Motion (random movements) say that such a range will typically encounter 3.6 squared = 12.96 zig-zag steps (5% each) traversing such a range.
Rounding up to 13 sets of 5% steps, generally 7 will be up 5% moves and 6 will be down 5% moves. The higher up count reflects price appreciation over time (5% overall upward bias excluding dividends).
Scaling to 30% moves (a typical AIM hold zone range)
18 / 30 = 0.6. And 0.6 squared = 0.36. Which implies 0.36 AIM round trip trades each year.
If the high / low range is 50% as ronc5 suggests then that modifies to
50 / 30 = 1.66 and 1.66 squared = 2.78 i.e. 2.78 round trip AIM trades per year.
Trading $x across a 30% price range more frequently is obviously more rewarding than trading that same range less frequently.
Note however that stocks tend to individually have higher yearly high / low ranges than do indexes and that yearly high and low ranges vary quite significantly over time (so AIM tends to capture more trades in some years and few (maybe none) in other years).
PS you can use these sorts of calculations to see that trading a 40% hold zone (i.e. SAFE 10%, Min Trade Size 10%) is little different in terms of $ profits to trading 30% hold zone (10% SAFE, 5% MTS). Take for example an average 50% yearly high low range then the 30% hold zone approach encounters (50 / 30)^2 = 2.78 cycle trades whilst the 40% hold zone approach encounters (50/40)^2 = 1.5625 cycles trades. Whilst there are fewer trades for the 40% hold zone approach, you trade more across that range i.e. if the 40% approach trades $13.3K x 40% range x 1.5625 cycles = $8.3K gain, the 30% approach trades $10K x 30% range x 2.78 = $8.3K gain
Just thought I'd post this as its quite interesting IMO.
Best. Clive.
PS There's some further (more general) examples of such Random Walk/Brownian Motion : http://ds9.ssl.berkeley.edu/lws_gems/2/random.htm
Hi BBnvestr
I looked over your portfolio and for AIM if you are just starting I would go 50 50 instead of 70 30. You might want to get some other opinions on the stocks that AIM likes. Low cap volatility positions work best. AIM stocks should also have 2 to 1 ratio on the 52 week high and low, for example if the stocks low for 52 week low was 10.00 you would want it to at least have a 20.00 high, just my opinion
Hi Stan and Welcome,
I read with interest your article at http://www.simplylivehappy.com/articles.html
It appears that your Learning Experience is not that different from a lot of other investors. I like to compare AIM to the natural cycle of Planting and Harvesting. AIM does a nice job of picking the better seasons for each. Also, we need to keep some seed for the next planting.
As far as ETFs go, yes, I've had good success with them while applying AIM as the overall management method. Read more here:
http://investorshub.advfn.com/boards/board.aspx?board_id=1292
Just as with broadly diversified mutual funds, ETFs help to remove much of Single Stock Risk. They don't remove "Market Risk" any more than any other vehicle. That has to be done with overall management such as AIM.
Using a discount brokerage will help to contain costs. If you choose ETFs wisely you can keep annual expenses very low on the investments which will help to compensate for any commission costs you might incur. ETFs also offer different ways to plan your overall portfolio as there are an abundance of Business Sector funds as well as Style funds.
Best regards, Tom
simplylivehappy.com Has posted an article on aim please look at it and give me your coments. I would also like to know if anyone has had succes using etf's and aim?
Hi BB, Re: Time line from $200K to $1,000K.......................
Traditional AIM will add about 30% to the value of a portfolio with each full market cycle. So, if we assume a $200K starting point, it would take approximately 6 to 7 market cycles to achieve your goal.
We usually experience a correction of small proportion at least once a year. However, deep market cycles don't come along as often. Let's say deep cycles come along every 5 years (probably that is too often) which would allow that big 30% bump peak to peak. By itself, then you would need over 30 years to get the job done. With a combination of deep cycles and more frequent market corrections one might achieve the goal sooner.
Looking at it slightly differently, we want to see the portfolio double twice and change. Using the "Rule of 72" can help. It states that roughly 72 divided by the expected annual rate of return will tell us how soon we can expect a doubling of our money. If we expect a 7.2% annual return, then 72/7.2 = 10 years to double. Since we need to double your $200K a bit more than 2 times, we could expect that it might take 20 to 25 years to get the job done.
Now, if we were able to achieve a 14.4% average annual rate of return, then we drop the doubling time to just 5 years. That would meet with your needs for achieving $200K growing to over $1000K in under 15 years. So, you will need to have consistent returns of around 14% per year to get to your goal in 15 years.
AIM can help considerably on the consistency end of things. It generally helps most by limiting the downside 'capture ratio' of the investment. Your job is to design the best portfolio you can for capturing the upside and let AIM moderate the downside. Your total return will depend upon the selection of assets you choose. you need:
1) Price appreciation over time
2) Dividend capture over time
and
3) Volatility capture over time.
The hard work is in developing an appropriate portfolio for #s 1 and 2. The easy part is #3 in that you just need to apply AIM to 1 and 2. Total Return is enhanced by AIM's activities in volatility capture. If you built a portfolio that would generate an 8% annual rate of return on average, you could expect AIM to add an additional 2% to that (about a 25% improvement) over time.
Hope this helps,
Tom
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
The Investment Answer Book......
I just received this book written by Gordon Murray & Daniel Goldie. To sum up in this short book how to be a successful investor it outlines a few core concepts basically asset allocation,diversifying,rebalancing and acquiring a fee based only financial manager for help. I admit I'm still rather novice with the investing universe however I feel that with the AIM strategy and the Valuestockselector program it will steer me to financial success along with my due diligence in evaluating equities. I would like to hear from experienced AIM veterans your success stories and if you would be willing to offer advice on how to further my knowledge in aquiring sound investments with annual solid returns in years to come.
My short Bio, I have 15 years to retirement with $200,000 in a traditional IRA and $40,000 in current job 401k. Can a $1,000,000 nest egg actually be achieved by then using AIM??
Thanks so much,
Sincerely, BB
Hi B², Re: Zig Zag analysis.......
With the Zig Zag function, we are only approximating a typical "round trip" of a buy to a sell (and visa versa) using AIM standard settings. Because the market doesn't always reverse at such points, we'll see strings of buys or sells in a trending market.
The Zig Zag shows only reversals of "at least" 30%. Reversals that then continue on for greater than 30% would only show one Peak or Valley. Along the trend line AIM would be doing multiple sells or buys before the next reversal.
So, your AI example is correct. It's buying multiple times into weakness and selling multiple times into strength where Zig Zag only shows the 30% min. reversals.
Another problem with Zig Zag usage right now is that we've come through such a pecular market in the last three years that the graphs are all skewed anyway. So, limit your graph interpretation to the last 12 months to get a feel. Example:
At each of the peaks, there was at least a 30% gain from the previous valley. That would satisfy AIM's basic requirements for a trade.
As a "default" I set up my StockCharts graphs to the following:
Weekly
HLC instead of Candlesticks
26 Week Moving Average
Zig Zag 30%
W%R at 14
Accum/Distr at 14
Here's JBL for three years:
What I want to see is the Zigs and the Zags in concert with the W%R moving to its extremes. Sometimes the Zig Zag will move less than the W%R. But when they move in concert, then we can assume it indicates a relatively efficient AIM trade.
Best regards, Tom
Zig Zag & the AI program...
I monitored the zigzag charts set @ 30 at stockcharts website and backtracked the same stocks with the AI software within the same time period. I found many more buys & sells with the AI program than with the zigzag criteria. I set the buy/sell resistence at 10 percent with 5% buys/sells with the conservative model (50% cash/50% equities). I am trying to figure out what I missing here? I'm inclined to follow the AI software transaction history from the amount of action indicated. I just was not sure if I was interpreting the zigzag charts right. My understanding is that every zig and every zig represents a buy and sell, is this correct?
Thanks
hi bb
good move. the extra cash will save you if (when) there is a downturn.
aim takes a few market cycles to see the results. be patient.
You can use the QUICK AIM CALCULATOR on Tom's website www.aim-users.com to find the hold zone. Just write that down on an index card and only look at your holding once / month. If they are outside the HOLD ZONE then figure out how much to trade.
Takes one minute / month if no trades. And there shouldn't be right away as you need a 15% move.
Toofuzzy
I think I will trim down my investments to about half the number with the 50-60% cash to spend. Does anyone use the automatic investor software here or use other means to monitor your investments?
One last question. Does this system really work? Are regular 10-20% annual gains actually feasible with using AIM by your experience?
I feel good about everything I'm reading and hearing but I would like to know from people who have been utilizing this over a period of years.
Thanks All
Hi BB
The V-wave is just used for starting up a NEW account. If the market was Jan 2000 or 2007 you would want to start with LOTS of cash and in March 3003 or early 2008 you would want to start heavy in stock. 20- 20 hindsight is a wonderful thing but the v-wave has been pretty good. Right now it is saying start with 59% cash.
Once an account is running the AIM buy and sell signals will have you buy and sell and that will change the cash level.
So if after this message you feel a little light on cash (in the near future) just add any cash you have coming in to the cash reserves of the accounts for a while. You can also pretend they all have 50% cash and borrow from one to fund a purchase in another (just don't go crazy and invest to zero) all your accounts shouldn't need more funds at the same time (at least that is the theory though it hasn't worked for me)
Also each of your accounts are quite small. Did you see my post on the main board about my last sale? 5% of $10,000 is only a buy or sell of $500 and your first profit is only $75!
So unless you are using LD-AIM ( pretend a $5,000 account is $10,000) so all the trades will be twice as big with twice the risk you end up working for pennies. That is why I wrote to start with a few accounts and add more over time.
I don't want to get in to LD-AIM here. It is a whole other animal and some adjustments need to be made to the standard AIM settings so it doesn't crash and burn.
Toofuzzy
Call me aggressive but here's my beginning portfolio
(no mutual funds currently)
anywhere between 5,000 to 10,000 each invested.
XOM
X
JPM
SINA
TJX
VIVO
CPRT
TDC
EZPW
DO
GTLS
RIMM
PBR
TECD
MFLX
ETF'S-
XME
EPU
PXE
Each stock is a separate portfolio with 66/33 split presently.
I guess I need to familiarize myself with the V wave strategy so I'm not too top heavy in securities vs. cash in the current stock climate.
I should really consider reassessing my positions it appears until I gain better some insight with market timing.
Hi BB RE why zig zag set at 30
Because the swing between an AIM sell to an AIM buy (or the other way around) is 30%
The SAFE 10% + MIN BUY (or sell) 5% = 15% from the starting point. Once you have the first trade it is 5% in the SAME direction but 30% in the opposite direction.
Toofuzzy
Hi BB
Start with at least $10,000 in each security in a separate AIM account.
Since the V-Vave is over 50% start with at least 50% cash
So that would mean each account should have at least $20,000 to start
OK so you may only have $15,000, thats OK start with $10,000 in securities and add to the cash during the year till you get it to what it should be.
If you don't have even that amount you shouldn't be buying stocks! Have an emergency saving account.
OK so you have $50,000 to $60,000
Decide in advance what you want to own ...... maybe:
Large value IVE
Small value IWN
Foreign EFA
REIT ICF
BOND switch to long term fund when interest rates invert (TLT) in the meantime SHY
So you can't afford to buy them all , maybe the first three at first. Use TIME to diversify. Add new positions every year or two till you own all the positions you want.
In addition to the above you may want to add an energy ETF IYE and a mining ETF IYM
All the above are I-shares funds but you could just as easily use mutual funds or ETFs from Vanguard.
This is supposed to be ZEN investing. Don't turn it in to a full time job.
Toofuzzy
Great, Thanks !! I'm sure I'll be back for more advice. Right now I'm chewing on quite a bit.
I am working with my IRA on using mostly stocks (80%) with ETF'S (20%). As I go along I will be fine tuning things with the VSS software and your leading me to recommended websites.
Hi BB
>>>>>One last question; I also am utilizing Mark's VSS program in evaluating stocks and his system locates good solid undervalued securities but not necessarily with high betas. Would there be some way to incorporate these selections and without compromising too much on volatility loss to maintain a productive AIM portfolio? Maybe I'm asking for the moon here but I'm willing to do the homework to obtain a system I can move forward with having the assurance of profitability as well as restful nights of sleep if that's achievable? <<<<
You can check his selections individually for beta if a screener is not built in to the software. AIM works with lower beta stocks just fine. The trading is just a bit less hectic and the deep divers a little less frequent.
But if you want to sleep at night while using AIM then invest in Vanguard funds or ETFs. They can not go to zero.
RE: Zig Zag
Go to www.stockcharts.com and go to their charts. zig zags is one of the things you can choose (like moving averages etc) Setting it to 30 matches the standard swing in AIM from a last BUY to a first SELL or a last SELL to a first BUY. So that will give you an idea of how many trades you WOULD HAVE HAD IN THE PAST. The future can be completely different.
Toofuzzy
Aimster thanks for your info I sincerely appreciate it. Don't mean to sound so remedial but what does set at 30 represent in your red zig zag line on graph?
One last question; I also am utilizing Mark's VSS program in evaluating stocks and his system locates good solid undervalued securities but not necessarily with high betas. Would there be some way to incorporate these selections and without compromising too much on volatility loss to maintain a productive AIM portfolio? Maybe I'm asking for the moon here but I'm willing to do the homework to obtain a system I can move forward with having the assurance of profitability as well as restful nights of sleep if that's achievable?
Thanks again,
BB
Learning the V wave as a novice. I am embarking on use of my new Automatic investor software which I find extremely helpful. Can I get some advice on where I can interpret the v wave and i waves. I really don't have the funds to subscribe to the value line website. Are they any other resources I can draw from to evaluate my stock selections as well as managing my cash reserves and equities?
Slow down, Tiger! :)
That's quite a mouthful for one paragraph with a lot of things to consider!
1) The V-wave or former I-wave is a benchmark indicator to give a reasonable suggestion for how much cash reserve percentage to start with, were you to begin a new AIM program today. Basically it looks at the risk level in the market and increases the percentage of cash to start with as the Bull runs for a longer and longer time, knowing that when the Bear puts in an appearance, having all that cash will be quite useful. So there's no "long term" interpretation of this signal, per se, since it's only used when an account is being started, unless you just want an overall "risk meter" to see where the market is.
2) Automatic Investor is a great piece of software and Mark's put a lot into it, but in order to fully maximize the value, having a good understanding of AIM by-the-book will help a lot. Knowing how calculations are made will let you understand the process better, rather than treating AI as some "mystical black box," from which the computerized "genie" will pop forth from to control your destiny.
3) As for evaluation, Yahoo finance under statistics offers quite a bit of info. Particular information to look for (other than the long-term profitability of the Company) is the Beta - the measure of volatility of that particular stock compared to the market overall. The higher the beta, the more volatility, the more AIM can work with the stock. In theory, then, penny stocks should be awesome with AIM. However, few will use them for AIM other than with truly "mad" money due to the amount of risk involved. The greater propensity for these to "crash-and-burn," especially with AIM's wanting to buy more on the way down, would recommend avoidance or extreme caution with money you can truly afford to lose. On the other hand, it could be like a lottery ticket over a long enough time period. If there were only some way to have a mutual fund of penny stocks to minimize the risk... I suppose a micro-cap fund like RMT might be about the closest one can get.
Another good source of info is http://www.stockcharts.com. A picture being worth 1,000 words, seeing a volatility pattern with their zig-zag function can be helpful. Cost for basic charting is free. For example:
The zig-zag red-line, set at 30, shows the retracement from each buy-to-sell, based on the by-the-book settings of 10% SAFE and 5% Minimum trade for each side, buying or selling. From late '08 going into '09, AIM would have taken great advantage.
More questions, let us know!
Best,
AIMster
Learning the V wave as a novice. I am embarking on use of my new Automatic investor software which I find extremely helpful. Can I get some advice on where I can interpret the v wave and i waves. I really don't have the funds to subscribe to the value line website. Are they any other resources I can draw from to evaluate my stock selections as well as managing my cash reserves and equities?
any input would be great THANKS
Great. Thanks for the advice.
hi jers
I can't see why not since it has unlimited shifting of funds without transaction fees so perhaps it's best..
Yup put in as much as they will match and then do a ROTH IRA on your own.
It is good to do your trading inside a sheltered account. No tax record keeping to deal with.
Toofuzzy
Hi Fuzzy, thanks for responding. I am still at that job and I was mistaken in thinking I could convert to a Roth. Regardless, I guess I am wondering if I can begin to AIM w/in my work 401K? I can't see why not since it has unlimited shifting of funds without transaction fees so perhaps it's best..
Hi Jers33
>>>>
I'd like to start AIMing but have a dilemma. I have about $30K in a work 401K and am wondering if it makes sense to bite the tax bullet and do a Roth conversion where I can AIM a couple of exchange traded funds. Or, perhaps I can just AIM inside my current 401K and then start a Roth on the side with spare cash? There aren't any transaction fees that I'm aware of in the 401K but the fund options are limited. I'm expecting to be in a higher tax bracket down the road, for what it's worth. Also, Vanguard, Schwab, or Fidelity for a Roth? Or maybe they're all the same. Thanks.<<<
1) I assume you are no longer at that job because you can't really take funds out of a 401K at a job you are still at.
2) If you are no longer at the job you can roll over to a TRADITIONAL IRA either to VANGUARD for funds or a discount broker for ETFs
3) You can roll the TRADITIONAL into a ROTH and pay the taxes and no one says you have to do it all at once so you can roll over what will be invested in stocks and leave the more stable stuff for later. That way you might keep yourself from being bumped into a higher bracket.
4) If you are still at the job you want to keep contributing to the 401K as long as they are still matching your contribution. If they match 5% contribute 5% if they match 7% then contribute that. It s free money. You can still do the Roth also as long as you are below the income ceilings. Does your job have a ROTH 401K ?
Tofuzzy
I'd like to start AIMing but have a dilemma. I have about $30K in a work 401K and am wondering if it makes sense to bite the tax bullet and do a Roth conversion where I can AIM a couple of exchange traded funds. Or, perhaps I can just AIM inside my current 401K and then start a Roth on the side with spare cash? There aren't any transaction fees that I'm aware of in the 401K but the fund options are limited. I'm expecting to be in a higher tax bracket down the road, for what it's worth. Also, Vanguard, Schwab, or Fidelity for a Roth? Or maybe they're all the same. Thanks.
Anyone, Your Opinion: I am testdriving Automatic Investor for 10 days. I looks pretty good. Your opinion of it compared to other software. I looks pretty thorough to a beginner. Thanks, Jim
Toofuzzy, Got the message. I will start with the S&P 500. I am test driving AutomaticInvestor for 10 days. I want to do some backtesting on some funds that I already have that have done well since Nov 2008. I will take my time and be patient. I have been side tracked for the last 7 years figuring out that day trading is not my cup of tea. About 15 years ago I picked up Lichello's book and always liked it's concept and stability. I am not in a hurry to get rich, just developing a stable plan. Thanks again for all your help and advice. I have been spending some time getting familiar with the web site and reading all the messages. I have gleaned a great deal of intel from them. Thanks again to you and Tom....................Jim
Hi Jimbo
A gold ETF should not be the first thing you own or AIM. As 1/20 or 1/10 of an overall portfolio that is another matter. The S+P 500 index fund was suggested as a proxy for the whole market if that was going to be your first and only fund.
Don't be afraid of getting rich slowly. Too many people try to get rich fast and to their detriment.
Having said all that a decent gold ETF is GLD. Unlike a stock fund it pays no dividend so all the income has to come from volatility. Do you feel lucky punk now do ya!
Toofuzzy
Hi Jim,
A fund that mimics the S&P 500 Index is probably about the same volatility as a diversified mutual fund. The big difference is that a passively managed index fund will be less costly to own in the long term than an actively managed fund. Remember that it is a very rare managed fund that consistently bests the S&P 500 Index. (something like 90% of all mutual funds don't do as well)
So, Vanguard's Index 500 Fund would be a good bet for a smaller account. The larger the total portfolio value, as TF mentioned, the greater benefit you can get by dividing up the account into several different (non overlapping) AIM managed components.
Best regards, Tom
Tom & Toofuzzy,
Thanks for the advice. I have an acct at Schwab with Mutual Funds. So, the volatility of the S&P 500 is better than most funds? or is that just a good place to start? I downloaded the spreadsheet and document and start sim trading and back testing until I feel ready. Meantime I will ask questions of the folks here. What do you think of a gold ETF?....Thanks Jim
Hi Jimbo
For mutual funds Vanguard can't be beat. Like Tom said if you can start just one fund then use the S+P 500. If you have $50,000 to $100,000 you can diversify by either style or industry and have a few separate AIM accounts. Vanguard has whatever fund you need. Some of us have started using Exchange Traded Funds the last few years. The advantage is instantanious pricing (unlike end of day like funds), the disadvantage is it costs "something" to trade. Use a discount broker online. I find the minimum account size to start AIMing is $15,000. $10,000 stock and $5,000 cash. That gives you a first trade of a min of $500 (5% of stock value).
Toofuzzy
Q.........
Anyone, hello I am new here. Have an original book by
Lichello and was always interested. I prefer Mutual Funds and
am curious what funds others here use. I will start out with
the calculator and spreadsheet that I downloaded to get up to
speed. What software can I use to backtest funds?
Thanks, Jim
-----------------------------------------------------
A.........
Hi Jim, Mutual Funds can work just fine with AIM, but because
of their diversified nature, they tend to follow broad market
trends. Our performance using them is then tied to their
performance plus whatever volatility capture AIM can provide.
Since the typical diversifed mutual fund has a BETA
(volatility index) close to 1.00 - same as the market -
there's not a lot of volatility to capture. If your portfolio
is large enough, you can divide it into smaller pieces and
AIM them individually to gain back some of the volatility and
therefore profitable capture.
A small account is probably best invested in an S&P500 Index
Fund. A bit larger and one can then participate in an S&P500
fund and possibly a small and mid cap Value fund. If your
portfolio is a bit larger, you could then divide it further.
My IRA is an example of an account with global presence
diversified between income and equity funds.
( http://www.aim-users.com/etfunds.htm )
It has ten total components (plus Cash). If larger yet, then
you can start to divide the equity funds by business sector
and gain even more volatility to capture.
So, "size" matters here. If you stick with something close to
the original Lichello model, you'll need approximately
$10,000 to $15,000 per AIM sub account.
The AutomaticInvestor software allows for easy backtesting,
from what I understand. I'll leave it to experienced users to
comment further.
Best regards, Tom
Anyone, hello I am new here. Have an original book by Lichello and was always interested. I prefer Mutual Funds and am curious what funds others here use. I will start out with the calculator and spreadsheet that I downloaded to get up to speed. What software can I use to backtest funds? Thanks, Jim
Minimum Transaction Values..............
Hi Nat, You've interpreted Mr. Lichello correctly. The usual +or- 10% SAFE is still in place and on top of that there's the addition of 10% min. trade size which needs to be considered.
What it means is that there's about a 40% change needed to get from a "last buy" to the "next sell" price. Or, looking at it slightly differently, you'll need the Portfolio Control plus or minus about 20% to create either sells or buys.
I believe Mr. Lichello thought that by slowing the process down, he could get by with less total cash reserve. He also felt it would reduce the number of transactions, transaction costs, etc.
Best regards, Tom
AIM minimum transaction. When reading Mr. Lichello's book, he states in the AIM-HI portion that the minimum transaction value is 10% of the value of the portfolio. With the safe value being 10% of the portfolio value, this means that the stock needs to change 20% of its value to make any move. This would mean that if checking every three months, very few transactions, if any will be made. Am I interpreting his instructions correctly? Is there a different way to do this??
Hi Fred
"Grid Trading" is a somewhat AIM like style that is applied to FOREX
Hi Fred
I don't have any experience with Forex. I will say that AIM needs an actual asset to make sence. Not for something whose value decays like options. Also derivatives of commodities might not work either (think DIG or DUG in relation to oil)
You don't need to get too fancy. If you AIMed IVE, IWN, EFA, ICF, and a short term US treasury fund that could be all you might ever need.
Toofuzzy
Re: AIM and Forex.......................
Hi Fred, That's a good question and unfortunately I don't have a good answer. I've not attempted to invest in the Forex market in any direct fashion.
I have used some currency ETFs and they seem to do okay with AIM so far. However, they've only been around a bit over a year or so and I don't have a lot of history with them yet.
Those currency ETFs are ususally set up as Euro vs U.S. Dollar or some other currency but always against the U.S. dollar. They are created by the ownership of relatively short term foreign currency short term debt securities, I believe. The good news is that in many cases these ETFs also pay a reasonable yield while we wait for some trades to occur. My first year in using them has produced somewhat "flat" results with some trading. Compared to the Equities markets, however, this has been very good performance.
In the Forex world, I would think you could also then set up Euro vs British Pound, etc. I don't know if there would be any interest paid as with the ETFs, but one would probably see a higher "Frequency and Amplitude" of price movements. AIM should like that for trading.
I hope someone with some Forex experience who also uses AIM will add further comment.
Best regards, Tom
Hi:
I have this question in my mind for long time. Lichello design AIM for Stocks and mutual funds, but
Can AIM be adapted for the FOREX market, buying mini lots instead of stocks?
There is a lot of volatility in that market. It is possible?
Thank you
Fred
terachon@aol.com or
terachoncohen@gmail.com
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