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Hi J, This week's BARRONS spends several pages discussing Asset Allocation and Portfolio Rebalancing. Page 23 starts the article. Reasonably well written, it might even have some "quote-ables" in it. I don't have access to BARRONS on line, I read it at the library.
Best regards, Tom
PS: did you see that I've added your Re-Bal site to my Other AIM Sites category? I'll go back and add a link to this thread as well.
Don
Interesting site and good to see another method.
I didn't have time to check it out in detail but I will later.
Thanks,
Jibes
Here's an interesting study on Monthly and Quarterly rebalancing, using VectorVest on the S&P500.
http://www.vectorvest.com/Performance2.htm
Is/has anyone ever used VectorVest?
To all.
The latest info is up for the weekly Composite trend.
http://jibes0.tripod.com/trendseeker.html
Very interesting data.
As I look at the chart of QQQ using PPO Xover it looks like a rally is in the offing. Just my opinion though for what it's worth.
Jibes
New updated charts on AIM Rebal (Trendseekers) site as of 7-5.
Also updated Composite Trend data for last week.
Jibes
AIM Re Bal at:
http://jibes0.tripod.com/trendseeker.html
This market action will certianly put my new composite weekly trend down into the aggresive buying zone.
I keep thinking we have seen enough but then down some more.
Then again perhaps some investors don't want to be in the market over the 4th due to all the talk about terrorest threats and that's what driving the market down. Maybe next week will be better.
Jibes
AIM Re Bal at:
http://jibes0.tripod.com/trendseeker.html
DonCarlson Schroder Ultra fund is unique and because of this you will find it near impossible to find stocks to match the managers style.
excerpt
"Bets against the market also contributed to Schroder Ultra's stunning performance the past two years (its impressive 2001 followed an even more remarkable gain of 148% in 2000). Manager Unschuld sold individual stocks short and bought index put options, a way of benefiting from a decline in an entire index. But these actions don't explain all of Ultra's performance. "He had some long positions up by amazing amounts," says Morningstar analyst Bridget Hughes. One huge winner: Hollywood Entertainment, a video-store chain whose stock jumped from $1 to $17 during 2001."
hope this helps
Irwin
Hello Jibes,
Well that's quite a coincidence, two "Jibe(s)"!
Would it tell you how much of each to buy?
Automatic Investor 2.0 will tell you how much to buy, however it won't tell you the amount you need to buy in order to rebalance, so you'll have to calculate that manually.
Let me know how it works out using AI 2.0 and your re-bal method.
Thanks,
Mark.
http://www.automaticinvestor.com
Hello Jibe (I notice there is a "jibe" and a "jibes," are these the same person?),
There is another fellow named jibe. I'm jibes. (boyhood nickname)
I believe your Re-bal technique will work with Automatic Investor. You can set up a portfolio containing 4 different stocks (you can actually have up to 50 stocks in one portfolio) and run it for a month. At the end of the month, buy and sell in order to rebalance. Then run it for another month and keep repeating.
Great! I think from my studies that 4 is the best number.
You'll have to calculate the amount of shares to buy/sell (and which stocks to buy/sell) manually.
Would it tell you how much of each to buy?
If the equity value doesn't change, after your rebalancing, then you're all set. Otherwise you'll also have to resolve what to do with the Portfolio Control when you make non-AI directed trades. AI allows you to manually adjust the Portfolio Control, so you can pretty much do anything you like in that department.
In my plan I use the amount of cash required each month (if any) and add that whether through aim or not. This maintains the AIM rule when buying.
jibes
It downoads OK on a PC, will be checking next week. thanks.
Barney.
Thanks, I'm glad to hear it's working on a PC, If you have any questions let me know and I'll try to ans them
jibes
It downoads OK on a PC, will be checking next week. thanks.
Hi LC,
The MSN references are good. However, if you look at the "last reported" date on the holdings, it's almost 9 months old. I had called Schroder to find out what their current holdings are, and they are completely different than what Morningstar is reporting in MSN.
While I like the screening function of MSN, there are two shortcomings, 1) MSN has a Fund Matcher and a Stock Matcher, it is not possible to find stocks that match to a fund. 2) The price behavior of the funds that the MSN fund screener finds does not perform anywhere close to SMCFX.
Another problem with funds, these days, is that nearly all of the more interesting funds are either closed to new investors, or have high expense fees. Many of the fund companies will even lock you out of trading if they classify you as a frequent trader.
Thanks for the suggestions.
Don
Good question, Don't think I have a answer, but here are their top 10 holding's that may help. http://moneycentral.msn.com/investor/partsub/funds/holdings.asp?Funds=1&Symbol=SMCFX
And here is a url for what moneycentral calls like funds.
http://moneycentral.msn.com/investor/invsub/finder/finderx.asp?Query=MV1QF41Z03T%22SMCFX%22ZF34Z03T%...
I am sure you will want to add to it.
This is more of a ReBalance question than an AIM question. The fund SMCFX performs better than just about any stock or fund in the market, but it's closed to new investors.
What if we could find the top 10 stocks that have a high correlation.
1. Invest in them for one month.
2. Then again, find the top 10 stocks that have a Hi-C. Some socks will remain, some will be replaced.
3. Rebalance the portfolio and repeat steps 1 & 2...etc, etc.
My question is....does anyone know of way to find stocks that have a Hi-C to a fund?
Hi JingLarry,
I don't have this problem with my real investments:)
When the price is far above your average cost, you could exit.
That is the Synchrovest way. You have the opportunity to start with a new and possibly more profitable vehicle.
Maybe Matt could give some remarks, his machine is running for a much longer time. I am also just researching this area, coming from a Synchrovest background.
Did you try to use a Buy/Sell safe in your test? That could improve the results.
Cheers, K
Karw & Matt:
I ran a test using Amazon which has fairly high volatility rate.
I used a similar formula to calcuate the Buy Factor/Sell Factor and Buy/Sell Amount using a LIFO cost basis. The results I had were OK but inferior when compared to Buy and Hold and even AIM (results not shown). What is your opinion?
In addition, like AIM we have a tendency to sell all our shares as the price rises; however, because we are using LIFO it create a tremendous threashold to institute a new buy signal after a prolonged price rise. For example, by the end of thest case, the porfolio had 69 shares with an average cost of $10.19. The current price had advanced to $18.78, which means we would need the price to drop substantially below $10.19 to institute a new buy signal.
Formula B&H
26-Mar-01 0.23% 0.39%
2-Apr-01 -8.90% -17.86%
9-Apr-01 28.77% 43.96%
16-Apr-01 32.18% 54.86%
23-Apr-01 31.47% 49.85%
30-Apr-01 32.90% 72.33%
7-May-01 30.91% 44.06%
14-May-01 30.94% 44.46%
21-May-01 32.57% 67.71%
29-May-01 32.48% 66.34%
4-Jun-01 31.61% 54.07%
11-Jun-01 29.40% 22.57%
18-Jun-01 29.34% 21.69%
25-Jun-01 30.54% 38.86%
2-Jul-01 31.32% 49.85%
9-Jul-01 32.50% 66.63%
16-Jul-01 32.50% 66.63%
23-Jul-01 29.23% 20.22%
30-Jul-01 29.16% 19.23%
6-Aug-01 27.65% -2.36%
13-Aug-01 27.67% -1.96%
20-Aug-01 27.84% 0.39%
27-Aug-01 26.95% -12.27%
4-Sep-01 25.94% -16.49%
10-Sep-01 22.42% -26.59%
24-Sep-01 13.85% -41.41%
1-Oct-01 25.64% -29.34%
8-Oct-01 33.97% -20.80%
15-Oct-01 33.40% -21.39%
22-Oct-01 29.09% -25.81%
29-Oct-01 20.94% -34.15%
5-Nov-01 24.87% -30.13%
12-Nov-01 42.40% -12.17%
19-Nov-01 43.39% -10.89%
26-Nov-01 57.66% 11.09%
3-Dec-01 59.18% 14.92%
10-Dec-01 57.30% 7.95%
17-Dec-01 54.65% -1.86%
24-Dec-01 57.04% 6.97%
31-Dec-01 60.61% 20.22%
7-Jan-02 58.44% 8.24%
14-Jan-02 56.89% -0.29%
22-Jan-02 64.51% 41.71%
28-Jan-02 63.92% 34.74%
4-Feb-02 62.92% 22.87%
11-Feb-02 63.66% 31.60%
19-Feb-02 63.38% 28.26%
25-Feb-02 65.30% 51.03%
4-Mar-02 66.10% 60.45%
11-Mar-02 64.17% 37.68%
18-Mar-02 65.42% 52.40%
25-Mar-02 64.40% 40.33%
1-Apr-02 63.73% 32.48%
8-Apr-02 63.57% 30.62%
15-Apr-02 64.59% 42.59%
22-Apr-02 66.56% 65.95%
29-Apr-02 66.35% 57.51%
6-May-02 66.57% 66.24%
13-May-02 67.12% 88.03%
20-May-02 67.20% 91.07%
28-May-02 66.89% 78.90%
3-Jun-02 66.98% 82.34%
10-Jun-02 66.54% 65.06%
17-Jun-02 67.03% 84.30%
Hello Jibe (I notice there is a "jibe" and a "jibes," are these the same person?),
My apologies for not responding earlier. I didn't notice your post until just now.
I believe your Re-bal technique will work with Automatic Investor. You can set up a portfolio containing 4 different stocks (you can actually have up to 50 stocks in one portfolio) and run it for a month. At the end of the month, buy and sell in order to rebalance. Then run it for another month and keep repeating.
You'll have to calculate the amount of shares to buy/sell (and which stocks to buy/sell) manually.
If the equity value doesn't change, after your rebalancing, then you're all set. Otherwise you'll also have to resolve what to do with the Portfolio Control when you make non-AI directed trades. AI allows you to manually adjust the Portfolio Control, so you can pretty much do anything you like in that department.
Otherwise AI will take care of everything else for you.
Let me know if you have any other questions (and if you reply to my post, rather than posting a new topic, I'll be guaranteed to see it ;0)
Regards,
Mark.
http://www.automaticinvestor.com
Hi Jibes, nice spread sheet. I am sorry that I was not able to help you on it. I had hard drive problems. I was just starting on the one you sent to me, and checked your new spread sheet and saw that you had fixed it yourself.
Hi JingLarry,
Seems ok to me, you buy for $20, that is for the current price actually not 2 shares but 2.5 shares.
You always buy more when the price is low.
(Synchrovest does the same thing, but needs regular investments.)
Greetings, K
Matt & Karw - I am a little confused. I am trying to work out your system. For example, let's say the following:
Cash: $100
Stock: XYZ
Cost: $10
#Shares: 10
Current Price: $8
Let me know if this is correct:
Buy Factor: 1-($8/$10) = .20
Buy Amount: $100*.20 = $20
So would you then buy 2 shares or is there some kind of SAFE system being used?
To Everyone.. Aim ReBal SpreadSheet available:
For those of you who are interested. I have a link to my AIM Re-Bal Spreadsheet. I use a Mac but it should work on an intel machine as well. I'm just guessing that it 's downloadable even though I did download it myself as a test.
Anyone who would like to test it and let me know if there is anything missing or wrong with it please. Or if you have any improvements to make.....
I do not gaurantee the accuracy or even the correctness of the spreadsheet. You would be using it at your own risk.
BTW. it is set-up for four stocks monthly. The prices go in the blue area of columns L,M,N and O. It is set up to not use more cash than available, although it may be in the red by a little at times.
I have 3 years worth of the lichello series with each stocks price offset by the next price in the series. You will see what I mean anyway.
I know there will be a few questions.
The link is the very last thing at the very bottom of my site home page (link below).
Good luck. I hope it's not too confusing.
Jibes
AIM Re Bal at:
http://jibes0.tripod.com/trendseeker.html
E*trade
Does anyone use E*trade? What do you think about it?
Are there better brokerages? I read a little about foliofn.
Robert
I think that if I had two or more deep divers I would use aim Re-Bal on them. I would simply add the two Portfolio Controls together, and go on from there. What you should see is, as you re-bal the stocks the aim sell price point should start to decreace, until normal AIM buy, sells start to take place. At this point you should be able to go back to aiming each stock by its self if you want to.
One has to be careful when dealing with these stocks. Make sure you know why the stock is down so much. There could be a good reason. If you were to do the aim re-bal you could be selling off part of your good stocks just to buy more of a loser and this could put you into a vary dangerous position. This of course could be done with reg aim too by simply taking cash set aside for other stocks. It's one of the pitfals of aim and has to be monitored closely. If a stock has a bad story it can always be sold and another put in it's place.
jibes
Note: while I have been following the board, I have not done any tweaking myself, so I cannot give you a spread sheet. but there may be someone on the board who can.
Yes, I would like some ideas on how people would go about constructing a spreadsheet for AIM Re-Bal.
I have one and it's set up like one would do it on paper.
I have more or less a reg AIM section at the top of the sheet and then for each month I have the re-bal sections below.
It works well enough. I copy each rebal "block" (one below the next) down the sheet. I leave enough room at the top for the AIM part. The two sections interact with each other by my input back and forth. It's set up kind of like it's shown on the web page.
I can't help thinking there has to be a better way, like each months entries made on a single line across the sheet like one would do with AIM.
Any Ideas?
jibes
Hi Karw,
Here was my viewpoint on it. You have several stocks that have become Deep Divers, that even though they have dropped down in price to a new level, they are still, giving you good price movement. Just they are at too low a price level for normal AIM to react to them.
Now one of the first things you have to do is research the stocks all over again. You have to find out why the price dropped, and whether the company will survive. If you can convince yourself that the company will survive. Then if you don't want to wait for the stock to recover. You need to do something, so that you can get back to buying and selling.
If you continue to use normal aim you must ether reduce portfolio control, or add enough new cash so that aim can buy more shares. If you lower the portfolio control, and the stock starts to recover you will start to sell shares at to low a price. If you add more cash to the stock, you may end up having to much cash in one stock, you are defeating your risk management.
Note I have not done any spread sheets to support this, I am simply working with logic here.
With AIM RE-BAL, you are not adding any more new cash, so you are not increasing you risk. Your portfolio control stays the same, which means if one or both of the stocks starts to recover you will not start to sell too soon.
Now, the odds are high that your two stocks will not go up and down at the same time, (if they are I recommend selling one, and buying a stock in a different sector). As you re-balance them (I recommend you use a percentage, not at a set time) your portfolio value should start to rise, portfolio control stays the same ( you are not doing a AIM buy, no cash). After a while, could be a long while, portfolio value will get high enough, to get a AIM sell.
Here is one stock that is a Deep Diver that I think will survive, even though it is in bankruptcy, ACK. This stock went from $80 to a low around $1, then back to $4, and is now bouncing around $2.50 or so. It may take this stock over ten years to get out of bankruptcy though, they have a very large legal debt that they have to pay. If you got in this stock at $80 you probably would run out of cash around $40-$35 range. By re-balancing you should get decent buy sell action.
Note I am not saying buy this stock! It is high risk! Now that it is in bankruptcy, information is hard to come by, and no one is following it, you would be on your own here!
But if someone wanted to test my idea, I think it would make a good test candidate. Some of the other stocks that are covered by the Asbestos class action suit, may be good candidates to. Almost all of them have declared bankruptcy.
Hi Lc,
Excellent strategy!
What you should see is, as you re-bal the stocks the aim sell price point should start to decreace, until normal AIM buy, sells start to take place.
I keep thinking about this sentence. Is it because one of your stocks goes up, by doing the ReBal, all stocks go up and you reach safe AIM territory?
So one stock saves the rest?
Kind Regards,K
Great post, there must be quite a few of us with DD's sitting doing nothing, a few good stocks that have fallen on bad times.
Subject Deep divers: A deep diver is a stock that has dropped in price enough that the AIM program has used up all its cash on the stock, and the stock is staying outside the sell point. There has long been a discusion on just what one should do with them.
Should you sell them and take a loss. and restart a Aim program in the stock?
Should you adjust Portfolio control, so that AIM starts to buy and sell again?
Should you take the stock and start using X-DEV on it?
All these are good questions,I think that if I had two or more deep divers I would use aim Re-Bal on them. I would simply add the two Portfolio Controls together, and go on from there. What you should see is, as you re-bal the stocks the aim sell price point should start to decreace, until normal AIM buy, sells start to take place. At this point you should be able to go back to aiming each stock by its self if you want to.
Jibe, While re-Bal is a old technique, the way it is being used here, is new to AIM. I do not believe that any software is curently using it. This method is to new yet. First will come pencil and paper , then testig spread sheets. If that looks good then will come spread sheets/programs for investers to use.
Aptus(Mark) who gave you the link to AI, has alway's had a high interest in new idea's. How ever he will not put a idea in his programs unless he thinks they will work, and he has tested them in all types of markets.
So you ether have to wait or become a tweaker, you can tweak using pencil and paper or make your own spread sheet. Your pick, I use both myself.
Note: while I have been following the board, I have not done any tweaking myself, so I cannot give you a spread sheet. but there may be someone on the board who can.
AI
Will AI work with the Re Bal technique? I downloaded the shareware, but haven't looked at it closely.
jibe
AIM Re-Bal site has been updated to show comparison between it and standard AIM. I know some of you were inerested in this.
Jibes
AIM Re Bal at:
http://jibes0.tripod.com/trendseeker.html
It is the backtesting and optimizating feature of Automatic Investor that makes it my choice.
Hello Jibe,
Yes, there are at least 5 other software packages (including online services) available that allow you to implement AIM.
Mine is called Automatic Investor. You can download a free 30-day trial at http://www.automaticinvestor.com/trial.html
Please let me know if you have any other questions.
Thanks,
Mark.
http://www.automaticinvestor.com
jibe you could try doing it the old fashion way with paper and pencil try this link
http://www.jjjinvesting.com/chap2.htm
HTTU
Irwin
Tracking investments
I curious what investors use to track there AIM portfolios.
I've seen an excel spreadsheet that tracks a single stock. I heard of the Newport software. Do most investors customize a spreadsheet to meet their specific needs? Is there other software?
Thanks
Hi Matt,
In my AIM spreadsheets I have an automatic stack for Buying and selling. So if there is a buy or sell, I don't have to do anything manually.
There are a few limitations:
1- For a stock dividend I perform a manual stack change. I could automate it, but the annoyance factor is still too low.
2- A buy or sell only applies to two stack elements. If it applies to 3 stack elements I manually change the stack. I am just too lazy to 'program' a 3 stack item change. They actually hardly happen in my current trading pattern. If they would happen more often I would automate it.
My stack runs from left to right at the right border of the spreadsheet. So the items pop up and down from left to right.
There are some limitations there. I have not reached those limitations yet, so I leave it as is.
All this is implemented in my AIM spreadsheets, which are a product of continous development. My 'new system' spreadsheet is very basic and has manual stack handling currently. I could easily automate it analogously to my AIM spreadsheets.
Hope this answers your query, K
Hi K,
I also had wanted to ask if you were able to make the one stock stack (or history) automatic in your spreadsheet. In other words, when there is a sale, does the spreadsheet automatically look at your stack and start at the end and begin removing shares? Or, in even more "other words" <lol> have you made the LIFO process automatic within your spreadsheet or do you have to look this up manually?
Matt
To All:
For those interested and even though it's not exactly an AIM related thing I have a new feature on my website called "PPO Xover." Check it out.
Jibes
AIM Re Bal at:
http://jibes0.tripod.com/trendseeker.html
Hi K,
I've had a chance to look at your formula. It is a "cousin" of the one I had proposed earlier. I will perform tests on both of them and produce the results here.
I'll be gone all day today, so it will probably be sometime over the weekend before I can get to it.
Thanks again.
Matt
Hi Matt, those are the formulas I wrote down in my previous note. Instead of ACPS, I had total cost; and instead of CP I had current value. But of course this is the same when you divide out the number of shares.
So, yes indeed, these are the formulas that I use. This morning I had my first Buy transaction. I like to implement things in a real machine, because that somehow attaches my thinking and ideas. I think you can call the attachment 'greed'.
I published this on Lost Cowboys forum, the systematic investment forum. This system is not ReBal, it is not AIM. The handling of cash is similar to Synchrovest, 2nd gear. So I thought the discussion probably should be on that forum?
This formula set has some special features, which I want to feel-through and use to increase my understanding of the AIM algorithm. I sense deeper structures here.(And it is only up and down!)
Kind Regards, K
Hi K, I had to rewrite your formula in the following way to understand it better:
ACPS = average cost per share
CP = current price
buy factor = (1 - CP / ACPS)
sell factor = [(CP/ACPS - 1) * ACPS^2] / CP^2
Is this a faithful translation?
Matt
I performed 2 more tests.
Test 1
I wanted to see again the effect of rebalancing alone in comparison with 'AIMing.' This time I chose two fake stocks that were exactly negatively correlated as I did previously, but this time one of the 'stocks' had half the amplitude of the other one.
To create the fake stock with half the amplitude, I started with a 'stock' at 4. The next price in Lichello's series is 5 - for a difference of 1. I halved the difference and added it to 4 - for a price of 4.5. Next price in the Lichello series is 8 - for a difference of 4 from 4. I halved this difference and added it to 4 - for a new price of 6. I repeated this process for 10 - for a new price of 7.
I started the Lichello series at 10 (normal) and started the less volatile fake stock at 4.
Rebalancing alone produced: $246,565.
AIMing both produced: $957,457 + $44,479 = $1,001,936
Test 2
I created two fake stocks. One based on the Lichello series and the other the Lichello series beginning at 8 (that is, skewed backward 1 month). This represents two stocks that are closely positively correlated (the opposite end of the spectrum from the exactly negatively correlated example in my previous post.)
Rebalancing alone produced: $25,150
AIMing both produced: $957,457 + $528,380 = $1,485,837
The conclusion I draw is that rebalancing alone only works when there is an exact negative correlation of equally volatile stocks. Synergy is the next question I want to look at.
By the way, my thought now is that I should also investigate AIMing individual stocks and rebalancing the portfolios rather than rebalancing within a basket and AIMing the basket.
I thought I'd share this food for thought.
Matt
My thanks to Don Carlson for finding a small mistake in my post about rebalancing.
I made the Lichello series and its inverse for 1 year. I then copied it and pasted it in my spreadsheet *8* times - you know, for 8 years (what an idiot I am - that made it 9 years). This is why I program and don't use spreadsheets.
Anyway, here are the revised results:
Rebalancing alone: $1,436,164
AIM (w/Matt Modification): $1,352,744
Notice that I did not make the mistake on the AIM side because I ran that through my program rather than on a spreadsheet.
I have other tests I will be running. Don, keep watch that I don't make any other stupid mistakes!
Matt
John, keep in mind I'm not proposing rebalancing by itself. Nor, am I trying to find the best set of parameters. I'm trying to think of tests that will inform me on basic questions I have about the nature of things. Once I am convinced about the nature of things, then I will act. And, after I have come to whatever conclusion, I won't then optimize to find the 'right' parameters.
Regarding your test: you're right about RYAIX not being the true inverse. Also, I'm doing a test now that shows the results of rebalancing through the various stages between positive and negative correlation.
Matt
Typically, asset allocation rebalancing takes places annually. AIMing individual assests during the year should maximize results. If your stocks are covering different market sectors, AIM should take care of the interemediate stock movements and longer term rebalancing should take care of sector changes.
Thx Matt and Jibes.
I did a quick spreadsheet last night to simply rebalance between QQQ and RYAIX (inverse of QQQ) using the monthly figures from 1/00 to 6/02. The result was not encouraging in that the study started with 20000 and ended with 19600 or so. Possible problems include RYAIX not exactly mirroring QQQ (past 3 years they have been significantly off), spreadsheet error (it was late :0) and/or insufficient volatility as compared to the lichello series. If accurate, however, it may strengthen the need to use AIM and rebalancing together somehow (e.g., Jibes' research).
Best Regards,
John
Jibes,
That too.
Matt
Matt,
Just guessing, butI suppose one ended up lower than the other because when the study ended it was at the low end phase of it's cycle.
jibes
Hi John,
Not really. The regular Lichello series has a head start lowering the average cost over the inverse series which just begins throwing off money. It made sense to me.
Matt
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