I'm Praveen Puri, the author of "Stock Trading Riches". It describes my Stock Trading Riches (STR) trading system which, like Robert Lichello's AIM system, is based on constant value rebalancing. (My book is available in paperback and Kindle formats).
I have been involved with investing for over 30 years. I have been a full-time trader, financial software developer, consultant at the Chicago Board of Trade, and a vice-president at a major bank. I'm currently an independent business consultant who use Strategic Simplicity to help clients achieve faster change and innovation.
I'm passionate about simplicity, and so I always gravitated towards designing simple systems. I was originally a big advocate of trend-following, but years of experience and testing convinced me that counter-trend rebalancing systems (such as STR or AIM) are better for achieving a repeatable and dependable economic-based edge in the market.
I read Robert Lichello's book on the AIM system in the early 1990's, but I ended up developing my own system because I felt that AIM had several drawbacks:
1. Lichello originally intended for AIM to be applied at the portfolio level. Thus, there would be one portfolio control and one cash. The problem with this is that individual stock movements cancel each other out, thus dampening volatility.
2. While AIM can be applied individually to each stock, I felt, as an evangelist for simplicity and elegance, that this was a bit too clunky and complex - having to track separate controls, safes, cash, etc.
3. I also didn't agree (when trading individual positions) of portfolio control increasing during down cycles, and not increasing during prolonged bull moves.
Note that these views don't mean that I think AIM doesn't work. AIM and the STR systems are cousins and any re-balancing system is a good approach to the market.
The basic Stock Trading Riches system is to build a portfolio of many positions. Each individual position is assigned a constant value (which never changes) and is rebalanced once a year. Growth happens at the portfolio level. The portfolio consists of the individual positions and a cash balance. At this level, the system uses constant ratio balancing to have a maximum cap on the cash level. For example, the default value is 30% cash.
If cash builds up over 30%, then the cash is used to add new positions. Besides the basic system, my book also discusses optional rules, trading psychology, and (in the 2009 updated section) ideas for stock picking, IPOs, portfolio design, etc. Readers of my book also get a link to download an Excel spreadsheet of the basic rebalancing system.