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That beep is actually a system beep that is automatically played when a warning window pops up. So I can't have AI disable it without affecting the rest of the system.
I get it, not a "bug," a feature! <grin>
Your suggestion sounds good. Look forward to it!
Thanks,
AIMster
Hi AIMster,
That beep is actually a system beep that is automatically played when a warning window pops up. So I can't have AI disable it without affecting the rest of the system.
However I do have an item on my list to give the option of not having the windows come up when doing a multiple portfolio update. The new recommendations can then be viewed from the Portfolio Manager window. So hopefully that will allow you to get around the annoying beeps.
New feature request:
A switch under tools to turn the sound on or off. When one gets multiple recommendations when updating all holdings, that Windows default beep gets a little irksome after the first couple.
Thanks!
AIMster
New Pragmatic Investor paperback book now available at Amazon.com
I wrote a book. It's a good book. It's available at Amazon.com here --> http://www.amazon.com/exec/obidos/ASIN/B002ACXX64/automaticinvesto
If you get the urge, grab a copy for yourself and your family.
Thanks,
Mark.
Hi Jimbo,
Split Safe is the idea of separating the buy and sell percentage into individual variables. Lichello had one SAFE variable (which he set to 10%) that he used for both Buys and Sells.
Tom Veale came up with the idea of using one variable for Buys and another for Sales. As such, it doesn't make sense to speak of an AI model that duplicates split safe. You can set the buy and sell safe to the specific values you want and then save the model. Then, when you subsequently use that model, your saved split safe settings will be used.
The same things applies to Vealies. You can set the Vealie parameter in the model, save the model and then when you use that model in future portfolios, your customized Vealie setting will be used.
See http://www.aim-users.com/aimchng.htm for more information on split safe and Vealies.
I hope that helps.
Anyone, Is it possible create a model that duplicates the "Split Safe + Vealie" and others. Maybe by using the Customized Model? I am new to AI and am trying to get a handle on it. Thanks, Jim
AIMster, thanks just the kind of infor I am looking for. I will keep this in mind while testing and earning.....Jim
I am testing it with a S&P 500 Fund
Hi, Jim,
To continue from the last post...
AIM is a mechanism to capture the volatility of a security (or fund) as the price goes up-and-down over time. It implements the often spoken of, but seldom implemented wisdom in the market maxim to "buy low, and sell high." It does so by emphasizing taking a contrarian trend, i.e., if people are buying, you're selling, they're selling, you're buying. The goal being to profit on future retracements over up-and-down cycles.
Point of all that being that the S&P 500 is not the most volatile of investments and you won't see the benefit from using AI with it as you might other holdings. A sector fund, for example,will still give you the benefit of being in a fund, rather than a single stock but is likely to move around more in price than something as broad-based as the S&P 500.
Using SPY (an S&P 500 ETF) from 1 Jan 2000 through present returns this (from the AI historical testing data the "conservative" configuration setting (under the tools menu):
AUTOMATIC INVESTOR HISTORICAL ANALYSIS FOR SPY
======= PERFORMANCE =======
Current Portfolio Value: $9,577.51 (107 shares owned)
Profit or (Loss): ($422.49)
Simple Return: -4%
Annualized Return: 0%
Buy/Hold Portfolio Value: $7,140.20 (79 shares owned)
Buy/Hold Profit or (Loss): ($2,859.80)
Buy/Hold Simple Return: -29%
Buy/Hold Annualized Return: -4%
Return on Capital at Risk: -6.11%
Average % Capital at Risk: 69.09%
Analysis run on 26-May-09
Daily Price Data Chosen
Using IYE the energy ETF for the same period:
AUTOMATIC INVESTOR HISTORICAL ANALYSIS FOR IYE
======= PERFORMANCE =======
Current Portfolio Value: $16,202.21 (337 shares owned)
Profit or (Loss): $6,202.21
Simple Return: 62%
Annualized Return: 6%
Buy/Hold Portfolio Value: $18,506.07 (641 shares owned)
Buy/Hold Profit or (Loss): $8,506.07
Buy/Hold Simple Return: 85%
Buy/Hold Annualized Return: 7%
Return on Capital at Risk: 125.56%
Average % Capital at Risk: 49.40%
Analysis run on 26-May-09
Daily Price Data Chosen
Note while it didn't seem to do as well as buy-and-hold in terms of dollar amount at the end of the test, it did return what it did with less than 50% of your capital at risk!
Best,
AIMster
Anyone, New here. I am test driving AI for 10 days and want to get to know it as much as I can. Am I correct AI interfaces with my broker? I am testing it with a S&P 500 Fund from Schwab where I already have an account. Will it interface with Schwab or just stock brokers?
Hi, Jim,
AI is a standalone program that gives recommendations to buy, hold, or sell, based upon the investing algorithms developed by Robert Lichello. As such, you are the interface between any recommendations and your broker. Some people use GTC orders so they can trigger "automagically," others go for a market order approach, closer to real-time.
The algorithms mentioned are defined as "AIM," or "Automatic Investment Management." Mr. Lichello defined the development of and rules for AIM in the book, "How to Make $1,000,000 in the stock market automatically." ISBN: 9780451204417. I grant the title is "hokey" but the underlying methodology is based on mathematics and helps to remove emotional decisions from the investing process.
Aside from this AI board specifically there is a general AIM board where theory questions as well as implementation ideas and improvements are always under discussion. Your questions and comments will be welcomed.
see: http://investorshub.advfn.com/boards/board.aspx?board_id=949
Best,
AIMster
Anyone, New here. I am test driving AI for 10 days and want to get to know it as much as I can. Am I correct AI interfaces with my broker? I am testing it with a S&P 500 Fund from Schwab where I already have an account. Will it interface with Schwab or just stock brokers?...........thanks, Jim
Hi AIMster,
Yes, this is on the list. I'll add it to the next SP update.
Hi, Mark,
Request:
Might have mentioned this one before but it would be nice to have the columns in the portfolio manager window sortable by column heading. This would sort the portfolios in alpha order, or group all the buys, sells and holds together too.
Thanks!
AIMster
AIM Conference 2001...
I recently decided to convert some old VHS tapes to a digital format before my tapes (some nearly 20 years old) disintegrated.
And lo and behold if I should not come across a copy of the AIM 2001 conference. So far I've converted presentations by Tom Veale, Bernie Goldberg and me. I've got half of Barry Savage's presentation converted and I plan to do all of the presentations that I find on the VHS tape.
So if you're interested, visit http://www.automaticinvestor.com/videos for a look (currently I've only uploaded a trailer but will upload all of the actual presentations in the coming weeks).
For those who purchased "the Pragmatic Investor" digital book with Automatic Investor, I've set up an affiliate program (that's a program where you refer people to the PI book and if they purchase, you earn about $35 for each sale).
For details on the ebook visit --> http://www.pragmaticinvestor.com/pibook
If you're interested in participating in the affiliate program, visit --> http://www.clickbank.com/promote_products.html (or just send me an email and I can get you started).
Hi AIMster,
I had given this some thought and weighed the pros and cons, but at the end of the day, AI has been selling at the current price for 6 1/2 years, so I decided it was time for an increase.
To determine the price, I did a survey of other investment programs out there and realized that most with comparable (or less) functionality/complexity were at least double AI's current price (even the PCA software is about $100 more).
So although the price increase appears steep, I think that's mainly because the software has been selling relatively inexpensively for such a long time. Compared to others out there, the new price is still comparatively cheap.
The other reason for the price increase is that I'm planning to build a single framework for all 3 of my current products, AI included, so that they can be easily moved to the cloud computing model (Microsoft has a beta cloud platform called Azure, which I'm currently evaluating, and Amazon has had one for some time now).
Of course doing this requires new investment in development software and computers as well as ongoing cloud computing expenses, so this is one way to defray those costs.
Personally I believe AI for $297 is a good value. If others don't, that's okay, I know there are many other AIM tools that are free or nearly free that they can use.
As always, I appreciate your comments and insights. There are a handful of AIMers out there that always give me good feedback and you are certainly one of them.
Automatic Investor's price will be increasing by $100 U.S. on Feb. 15th, 2009.
Of course, you can set the price as you wish, but I'm surprised at a roughly 33% increase in a time of economic uncertainty and people less likely to invest in what is essentially niche software. If you need it, it does an admirable job, but I'd be interested in knowing down the road if the customer base actually increases at the higher price.
There is a perception that greater functionality comes at a greater price, but for us frugal types we want the most functionality at the least cost. <grin>.
I wonder if you'd get more customers if you charged $100 less than the current price.
Good luck. And keep us posted.
Best,
AIMster
Automatic Investor's price will be increasing by $100 U.S. on Feb. 15th, 2009.
If you read this board, I just wanted to give you some advance notice on the price increase so you can tell your friends who might be interested in AI. Until Feb. 15th, AI can still be purchased at the current price.
OT: Just wanted to draw your attention to this site where I (and 5 others) will be going for a Guinness World Record and raising funds for the Canadian Cancer Society.
If you're interested, have a look here --> http://www.BoardGameWorldRecord.com
Hi TF,
No, I meant it the way I wrote it. I re-read my post and see that there might have been some confusion in that I wrote the two sentences as if they are independent of one another. I should have said given (1) and (2)...
If we're not using something like the vWave to set the starting cash reserve, it's better to ignore volatility with respect to cash reserve.
Hi Clive,
"I meant that it's the compound average rate that is the investment gain we can actually spend. The simple average is just a figure."
From your post I did understand that the Gummy calculator took simple average and SD into account but wasn't clear on whether its results were nominal or real returns (although I haven't looked at the web pages yet so I assume it would be explained there).
Thanks for the clarification. Yes, I agree. As you say, the compound rate is the true value while the simple average is not.
Hi Aptus
>>>>>For (2), the more volatile the stock, the less cash you can start with, in general.
Putting them together, start with the vWave's cash reserve recommendation and then add a bit to it if your stock is less volatile.<<<<<<
Did you mean to write the reverse?
More volitile = more cash , less volitile = less cash ????
Toofuzzy
Hi Mark
I worded my previous message poorly.
I meant that it's the compound average rate that is the investment gain we can actually spend. The simple average is just a figure.
I shouldn't have used the word "real" as that implies after inflation.
Given the simple yearly average and the standard deviation, Gummy's calculator shows the difference between that simple yearly average and the compound average.
Hi Clive,
Yes, the large-cap figures in the article are total returns and are based (if I recall correctly) on the S&P 500 rather than the Dow. When I wrote the article we were in the midst of a bull market which started circa 1994.
The S&P 500's P/E, until that time, was close to the historical average P/E (after 1994, the P/E went up significantly). So from a historical perspective, ending in 1994 seemed to provide a good approximation of the true returns/risks. Note that adding the years 1995 through 2000 (the article was written in 2001) to the analysis (i.e. [1926 to 2000]), skewed the returns upwards by over 1% per year for the ENTIRE period.
Given the freefall in markets over the past year, I'm not sure what the results from 1926 to 2008 would be, but I'm sure it would be more in line with the true values than it was back in the late 90s -- as your analysis of the Dow from 1928 to 2008 appears to show.
A simple subtraction showed that real returns were about 6% (assuming a historical 4% inflation rate) which is different from the Gummy calculator results (however without having yet looked at the calculator, my guess is that the calculator's results are more accurate since I just used simple averages).
Thanks for the calculator links, I'll have to play around with them.
Hi Mark
There's an article I wrote some time ago that explains AIM allocation (both at a micro-level and macro-level). You can read it here --> http://www.automaticinvestor.com/articles/mpt.html
Within that article
In the United States, between 1926 and 1994, small cap stocks have returned 12% annually with a standard deviation (i.e. risk) of 35%. Large cap stocks have returned 10% annually with a standard deviation of 20% over the same period.
Looks to me as though you've used total returns (capital + dividends) over those periods. I've compared the figures you used with that of the Dow (effectively a large cap play) for the period between 1928 to 2008 period which shows just 6% annual average (standard deviation of 20%). I suspect therefore that the 10% you mention arises out of including dividends.
We can approximate the compound average (real actual returns) using Gummy's calculator near the bottom of http://www.gummy-stuff.org/AM-vs-GM.htm
For the 12% mean, 35% stdev case = 6.4% compound average
For the 10% mean, 20% stdev case = 8.2% compound average
Gummy's web page content and calculator are a good tool for demonstrating (and evaluating) such risk/reward type situations that you might like to add to your own web page/article.
http://www.gummy-stuff.org/CAGR.htm might also be of use
Best. Clive.
Hello JP,
Selecting a model (i.e. configuration options) with which to start depends primarily on two things: (1) Where we are in the investment cycle, and (2) the volatility of your chosen equity.
For (1) I would recommend using the vWave (see the main AIM board for current values) to determine the approximate starting cash reserve, and then use a model that is close to that.
For (2), the more volatile the stock, the less cash you can start with, in general.
Putting them together, start with the vWave's cash reserve recommendation and then add a bit to it if your stock is less volatile.
As you're just starting out, I would recommend that you turn off all of the filters. The filters can actually increase returns over long time periods by removing inefficient trades. However they don't work well for all equities and it's best to get a feel for the AIM algorithm before you start adding complexity.
As for using Bond ETFs, you can if the ETF has enough volatility. However you should view this as an equity rather than it being some sort of asset allocation mechanism.
AI allows you to do asset allocation with its Asset Allocator function. This is where you would concentrate on allocation. If you did indeed AIM a bond ETF, it would form part of the overall asset allocation, along with your other AI portfolios.
The actual Bond ETF within an AI portfolio is not, in itself, considered an allocation (although AIM, by its nature, does allocate between cash and equity). There's an article I wrote some time ago that explains AIM allocation (both at a micro-level and macro-level). You can read it here --> http://www.automaticinvestor.com/articles/mpt.html
New AIM Account - I am looking at the different configuration options and trying to decide the right one for starting a new account. The aggressive and default show 0 cash which seems OK if we are at the bottom. The bullish holds 20% cash which my not be needed for a long time.
What are some of the things to consider?
What are some pros and cons of default vs aggressive?
Does it make since to AIM a bond ETF or is the cash portion doing the same thing from an asset allocation perspective?
Thanks for the excellent advice that this board provides.
Thanks Mark, that was very helpful.
You actually answered another one of questions as well. I already have a split strategy with my dividend payers. The strong ones get reinvested (so method 3 for me here)and the dribs and drabs simply go to cash to be accumulated until a buy opportunity arises (for timing) and I like #2.
Thanks again for the prompt and clear response.
Jam
Hello Jam,
(1) The recommended way to reinvest dividends is to use the "Add Interest or Dividends" function on the "Cash Reserve" menu.
This will simply add the dividends to the cash reserve for use in subsequent buy recommendations.
(2) Another way to add dividends is to use the "Deposit Cash" function on the "Cash Reserve" menu. This could cause a recommendation to purchase some shares (depending on your configuation settings) with the remainder added to the cash reserve.
The first method is more "Lichello-like" because he ignored dividends. The second method treats dividends as a cash infusion -- which in practice is really what it is.
(3) There is also another line of thinking that says you should use the entire dividend amount to purchase shares. This follows the reasoning that the stock price theoretically falls by the amount of the dividend, so putting the dividend back into shares cancels the dividend transaction.
None of these methods is incorrect, so use the one you like the best.
My recommendation is to use method (1) if the dividend is relatively small compared to your transaction fees. Use methods (2) or (3) if the dividend is relatively large.
Reinvested Dividends How-to
I am reinvesting the dividends in one of my holdings that is being aimed. What is the best way to handle the reinvested dividends in AI?
jam
Hi JP
There is nothing to say you can't own 2 funds in one IRA and 3 in another, or the same 5 in both IRAs and then treat the total of a fund in both IRAs as one AIM account (it is just the one fund). In the last case you can decide from which IRA account to buy and sell from, it really doesn't matter.
It is better to have fewer larger AIM accounts because otherwise the trades become too small to bother with. 5% of $10,000 in stock is only $500.
Toofuzzy
Hello JP,
I have received your emails and sent you 4 different replies (Nov. 22, Dec. 2, Dec. 4 and Dec 10).
Perhaps my replies are going into your SPAM folder. Please check there and let me know if you still don't see my email replies.
I started a blog a few months ago here --> http://aptusblog.wordpress.com for anyone who might be interested.
Hello JP,
You can use the portfolio manager to view summaries, charts and reports of ALL portfolios. Although you can see the 5 funds in the summaries, reports and charts, you can't currently isolate them (you'll see all the other portfolios too).
There has been a long-standing item on AI's enhancements list to add functionality that supports multiple users (although I've since re-thought the naming and will change it from "users" to "accounts").
When that is added you will be able to create portfolios under different account names (e.g. IRA1 and IRA2). This will allow you to do exactly what you describe.
However there is no scheduled date on when this functionality will be available.
Hi JP, Re: Grouping different accounts for common reporting......
I'll let the others respond for certain, but I believe that AutomaticInvestor will allow you to have multiple portfolios collected in multiple groupings and still be able to create a composite report.
You may be able to also do composite graphing, but again, I'll let others answer that.
Best regards, Tom
Aptus / TooFuzzy, Thanks for the replies. Now heres a new question.
Let's say I pick the 5 funds for my IRA. Based on what I have read I would set up each fund as a separate portfolio in AIM.
Now , if I have another IRA with 5 different funds I would set up 5 more portfolios in AIM. Is there any way to group the 5 portfolios for some reporting and charts?
JP
Hi JMP
>>>>
So if you decide to diversify over 5 funds, you should choose each fund so that all 5 have relatively low correlations between them but that each of the 5 is comprised of components that are highly correlated.<<<<
What Aptus is trying to say and what I found confusing until this line is that.
Instead of AIMing just SPY you could AIM 5 segments of the market separately. You want those 5 segments to be UNcorrelated (move in different directions. Within each of those funds you want the stocks they hold to be HIGHLY correlated (the stock in each fund should move together, probably be in the same industry)
If you don't have a lot of money in the account now but will be adding money over time, decide on what funds you want the account to EVENTUALLY own and start a new AIM account in each one over time.
Diversify by either STYLE (large, small, foreign, REIT, Bond) or by industry.
Toofuzzy
Hi JP,
As AIMster mentioned, using a broadly diversified fund such as SPY will lessen the volatility and therefore you will most likely trade less.
Having said that, in today's environment, the S&P 500 is fairly volatile. But keep in mind that usually AIM likes lots of volatility and therefore the ideal way to use it is to use funds that contain components that are highly correlated within one AI portfolio.
To get the diversification you need, you would select additional funds (that also contain highly correlated components) that have low correlations to the other funds you've chosen.
So if you decide to diversify over 5 funds, you should choose each fund so that all 5 have relatively low correlations between them but that each of the 5 is comprised of components that are highly correlated.
A good way to start using SPY in today's market is to check the level of the vWave and use it as your starting cash reserve. Then select one of the models in AI that has a starting cash reserve that most closely agrees with the vWave.
Or you could simply create your own model based on the vWave starting cash position.
Regarding filters, other than the user's guide, there have been discussions over at the main AIM board here at iHub. You can search the board for "filter" (but you have to be a premium member to do it -- although you can take a free 2 week trial).
just finished my trial with AIM and have decided to use it on my wife's IRA. I am thinking of using SPY as the fund. What are some recommendations for the configuration based on today's market?
Glad to see the program working for you. Mark's put a lot into it. Whilst SPY is a broad choice, you should also consider RSP. SPY uses a cap-weighted model for asset allocation, whereas RSP uses an equal-amount per holding. Thus a GE gets no more weighting than a far smaller firm dies. Being a very broad representation these funds aren't as volatile, meaning less trades.
Best,
AIMster
New user setup.
I just finished my trial with AIM and have decided to use it on my wife's IRA. I am thinking of using SPY as the fund. What are some recommendations for the configuration based on today's market?
I would also like to understand more about the filters. Is there a more detailed explanation than the manual?
JP
I agree with you on that point, but there are problems with the non-internet type of license model (which prompted the change to begin with).
I'll think about how to get around it and see if I can come up with something.
It is okay now but could you consider changing the license model back to something that is not dependent on an Internet connection? I should not have to be connected just to look at my transactions.
Thanks.
Hi Glenn,
Is this still happening? I checked and everything seems to be correct on this end. However between 8pm and 8:35pm, I received some emails saying this was a problem.
Please let me know.
The license server for AI must be down. It is really annoying to not be able to use the program because of a connection problem. Fortunately, I had an older version available that does not "phone home".
Hi AIMster,
I just re-read your post and your explanation was clear enough. I obviously didn't read it closely enough the first time through. I do that sometimes
Hi Glenn,
"I suppose it would make the percent returns that are presented in AI a bit more accurate though."
The returns calculated in AI are not based on the average stock price. So adding additional ways to view average cost will not affect the returns displayed in AI.
These returns are as accurate as they can be given the current portfolio value, the original investment and the elapsed time.
I'd be interested in knowing if this is something that would be truly helpful...
I do not use AI to track performance so for me it would not be important. I suppose it would make the percent returns that are presented in AI a bit more accurate though. There are other wish-list features that I have mentioned to you before that would be higher on my list.
Hi Aimster,
I am not an user of AI, but i use all 3 averages in my spreadsheets.
1- avg updated on buy and sell. when it gets negative it often is a good time to liquidate the machine
2- avg updated only on buys. i find that the most usefull avg price, it also keeps track of the past
3- avg price of shares on the stack, this will be unrealistic if you sold a few cheap stack shares
I tend to use nr 2 the most.
Regards,K
Oh, if that's the case then I misunderstood and his comment about an additional field becomes a possibility (of course then AI has to keep track of what shares were purchased and sold at what prices. Also functionality needs to be added to pick which method of calculating the average we use, such as LIFO, FIFO, etc.).
Yes, glennpj got what I was after. Perhaps my explanation wasn't clear enough. This would move AI into more of a true portfolio management system along with all the other nifty things it does now, hence my comment in the post back to Tom of "writing version 4.x" as I could see where this was going, if implemented.
Not sure if it's truly necessary, so put it on the "Real Soon Now" waiting list of things we'd like to see, kindasorta.
Datamodel changes do sometimes open the door to unintended consequences and then there's a heck of a cleanup after that!
So let's see if anyone else would find this of interest, as you suggest.
Best,
AIMster
Oh, if that's the case then I misunderstood and his comment about an additional field becomes a possibility (of course then AI has to keep track of what shares were purchased and sold at what prices. Also functionality needs to be added to pick which method of calculating the average we use, such as LIFO, FIFO, etc.).
I'd be interested in knowing if this is something that would be truly helpful to alot of users since it would involve a datamodel change (and datamodel changes should not be done lightly -- even relatively simple ones such as this would be).
I think what Aimster was referring to was a recalculation of the average cost of the shares remaining after a sale. This has nothing to do with the proceeds of the sale, only the cost of previously purchased shares. For example, if one buys 10 shares for $10 and the next month buys 10 shares for $9, the average cost of the shares is $9.50. If the next month the 10 shares of the initial tax lot are sold (sale price is irrelevant), the average cost of the remaining shares is actually $9, not $9.50, because all of the remaining shares are from the $9 tax lot.
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