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sing the dividend yield based ratio fuel appears to correlate well with prices. As dividend yields fall and AIM sees such as being relatively cheap and flags up a BUY, generally that will have arisen out of stock prices having risen. When yields are relatively high and AIM flags a SELL generally prices will have generally fallen. A relative strength/relative weakness type tracking style.
Hi, Clive,
So that's the theory, and an interesting one at that, but what are you using as a data source (yield of the whole market, S&P 500, DJIA)? Further what levels have you tested to use for trigger points? Buy if yield at ?% sell at ?% Thanks for any additional info.
Best,
AIMster
Very interesting article on Index investing:
Index Universe Interviews Executive Director of Dow Jones Indexes, John Prestbo
http://seekingalpha.com/article/46077-index-universe-interviews-executive-director-of-dow-jones-inde...
He makes a few interesting points on mutual funds vs ETF's - a shame he doesn't apparently know about Synchrovest or AIM. Still a good read from one of the big players in the index arena.
Best,
AIMster
Just to afford a house in my city, many houses have 2 or 3 families in them just to make the payment. You can't buy a single family home for less than $500,000 in my city. That's insane.
Hello!
I hear you! Seems to me that in a sense a lot of the "value" placed on things is in good part Ponzi scheme. I mean any given market, whether houses, stocks, what have you are regulated to some degree by the perception of supply and demand, the other part what people "decide" something should be worth. My question is who are the people in the background who initially set the "decision" as to the integral worth? For example your house 10 years ago was $160,000. Now around $500,000. The problem is that any "profit" would be an illusion if you were to stay in the same area, at least. You might be able to sell for $500,000, but it would cost you that much to buy something else. All you'd be doing is exchanging items of similar value.
I mean one can legitimately place the blame at the foot of the subprime lenders for making such loans in the first place. If the banks and such had kept a level of bonafide standards to qualify for a loan then this mess would have been avoided altogether. And some of these people are taking the hit, like the former employees of New Century Financial, for example.
I don't think the Fed is trying to reward bad behavior, per se. What they're trying to do is prevent a domino like effect of one company failing, and then another and another. These mortgages have been repacked and sold as investments who knows how many times with the promise of the underlying real estate as the ultimate collateral and the faith that the borrower will be able to make the payments to keep the game afloat. Now, in the end, if the underlying real estate is valued less than what it was before the whole mortgage got started, well, that's another rub, isn't it? This whole extension of belief is the Ponzi part I was referring to - like tulip bulbs in 1640's Holland, or South Seas stocks in England, as long as there's enough confidence in a "greater fool" to buy what you've paid an astronomical sum for to start with, the music keeps playing. When the music stops, those who can, grab chairs, everyone else is left holding a piece of the proverbial bag. Which blew up in the process.
Best,
AIMster
Since we tend to view the market from a contrarian point of view, here's an interesting contrarian opinion on ETF's that they're not the panacea that Wall St. would like you to think they are...
http://www.gurufocus.com/news.php?id=12333
AIMster
That sounds a lot like my list of funds to buy and rebalance at most once / year.
Which funds are you using to get a 10% average return?
Hello again,
Well the rebalancing is ongoing, actually. By this I mean that I'm still part of the working world and am saving so much for investing each month. So, I make additional investments under a Synchrovest formula spreadsheet of the whole portfolio taken together. I then look at which of the ten is either 1) the smallest of the 10 holdings or 2) which of the 10 is showing the greatest loss or least gain. I then take the amount recommended by Synchrovest and invest it in that one of the 10. I'll sometimes split the amount between the two worst or whatever. Next month, repeat.
Yield numbers from Yahoo Finance
The holdings are as follows:
Stocks:
ZF - Zweig Fund - 11.8% yield
RMT - Royce Microcap - 9.6% yield
EFA - Europe, Far East, Australia - 1.93%
EMF - Templeton Emerging Mkt - 27.1%
Income Funds
DHY - Credit Suisse High Yield - 10.6%
EAD - Evergreen Income Advantage - 11.0%
HYF - Managed High Yield Plus - 11.3%
PHT - Pioneer High Income - 10.4%
Other
DBC - Powershares Commodity Fund - 2.33%
RAS - RAIT Financial Trust - 38.2% (Real Estate)
According to FOLIOfn this group is returning 10.10% dividend yield. And yes, some of the funds may be redundant but I like the idea of 10 holdings as a nice, round number. With FOLIOfn one can get holding happy - their plan of multiple folios can hold up to 50 holdings in each, and in my case times 3 so I could theoretically hold 150 stocks or funds - talk about having one's own mutual fund! No, but seriously, that would add up to a heck of a lot of stuff to keep track of and since I haven't hit the megamillions yet, it would be a rather modest position in each of the 150, in other words, not worth it. At least not yet!!! <grin>.
Best,
AIMster
Of course a bit of whipsawing may happen as the stock price just touches the MA and reverses or crosses only for a few days and reverses. That is what drives me nuts with technical analysis.
Hi, TF,
I hear you. Back in the day I had a subscription to Fabian's Telephone Switch Newsletter - when it first came out the concept worked to some degree as the idea hadn't caught on that much. Once enough people started switching, though, the mutual funds started clamping down on the practice as it would rattle their cage too much! But I did see the 'whipsaw" effect you speak of. With folioFN ot's not too bad cost wise as there aren't any commission charges, but for others in a more "traditional" brokerage where you have to pay for each pass in-or-out of the position, yeah, that kind of strategy can add some overhead to the costs, bigtime!
I suppose one can minimize the whipsaw to an extent if one uses either a confirming indicator or some percentage 1-2% above or below the crossover before taking the action, or perhaps waits for a second day close to confirm the trend. That might reduce the return or increase the loss somewhat, but if the particular stock is in a quick turnaround state, might be the better thing to do to keep you in or out, depending on which side of the fence you're on.
Of course, following this sort of approach is trying to time the market - a practice that's not reputed to be one easily mastered nor accomplished. One can set up any sort of "rules" to follow - but when the crunch is on, will you follow and stay the course, or will those ol' pesky emotions kick in and make you one of the scared or greedy instead of an AIMer who buys from the scared and sells to the greedy?
I'm becoming quite enamored of a simple group of funds, increasing their overall positions with Synchrovest and not trying to fret all the TA stuff. A simple mix: 40% stock funds, 10% each US largecap, US Smallcap, Foreign largecap, Emerging market, 40% in income funds, 10% each in a real estate and commodity fund. I'm keeping them in all relatively equal balance and let the compounding work it from there. I'm getting over 10% dividend yield on the whole group of 10, so that should help going forward. I concur with Lichello - simplify!
Best,
AIMster
Comparative performance of DIA and DDM:
So far the last year the 2x has something going for it... Hmmm.
Pondering what I'm pondering?
AIMster
1) if the price is below the 200 day moving average, invest in the index ETF, reinvesting the dividends. Note that when the price is low, the yield is relatively high.
2) when the price is above the 200 day moving average, switch to one of the ultra ETFs which are designed to have twice the volatiltiy. They don't pay dividends, but at higher prices, the yields are lower anyway.
Hi, AH,
Sounds worth looking at. Using your example of the DJIA, for instance, I know the common index ETF for that one is DIA. What would be an appropriate 2x ETF version?
Well a little more digging and I found my own answer!
ProShares seem to be the ticket...
See:
http://etf.seekingalpha.com/article/16899
So for the corresponding DIA, the 2x flavor is DDM
See also:
http://biz.yahoo.com/ifunds/070620/20070620_leverageetf_com_etf_jb.html?.v=1
For a 1 year review of their comparative performance (as of last June, before the most recent turbulence).
Best,
AIMster
There is the "sniff test".
Basically if it sounds too good to be true, fughettaboutit. I was flipping the TV dial yesterday and caught an infomercial for who knows what - you sell $500 of whatever and they pay you up to $12,000. Now how many people do they get with this one? Probably as many as bad stocks get for people thinking they've found a quick shortcut to wealth! Due dilligence is a must... and even then no guarantees.
Funds are a safer bet, or at least more conducive to sleeping at night and not having to invest in Rolaids, Tums or the like. No, you won't get the meteoric rise of a stock, nor likely the blood-curdling screams of a precipitous decline, but in the end your portfolio might have something akin to the hardware store, "True Value".
Best,
AIMster
HOWEVER... Mr. Lichello [and I hope he achieves sainthood if he has not already done so] ... strongly advocated use of AIM with HIGH BETA MUTUAL FUNDS. Not individual stocks.
He does recommend individual stocks, but that at least 1/2 of a stock portfolio should be of solid "blue chips", a smaller part of one's portfolio could be of more volatile items. See 4th edition page 191, for example. As far as funds he recommends using Forbes September ranking issue (which should be out soon, I'd think) and selecting a fund that's done well in a bull market and not so well in a bear - that gives you a good volatility range.
Best,
AIMster
Since we're talking negatives, another problem with AIM and individual stocks is hitting deadwood. A stock that sits fluctuating with some variability but not enough to trigger AIM. As we know AIM requires a certain minimum variability to get triggered. In an attempt to avoid risky stocks you choose something life PFE, that can sit for years without making any AIM trades.
Hi, Adam,
This is where I find holding dividend-paying stocks or funds to be a useful compromise - you get at least some compensation for your time of holding between AIM directed trades.
Best,
AIMster
Scale trading has been done successfully by many in physical commodities, where there is no risk of bankruptcy. Wheat may decline, flatten out, but it's not going to zero, and will probably rally at some point, if for no other reason, than farmers simply move to a more profitable crop.
Hi, AH,
The point to notice in the article is that the author is considering individual stocks. I think that's why TooFuzzy and I, (perhaps others also) have decided that AIM (or Synchrovest) is best suited for funds: no-load mutual, closed-end or ETF. The deep diver is very real, as some of us have found out with stocks anywhere near the bad end of the mortgage business this year. Not to mention the former Enron, WorldCom victims as well. The chance of a fund becoming totally worthless is much less than that of an individual company.
Best,
AIMster
Is there such a thing as a Wall Street 'free lunch'?
I've been reading various strategies regarding split stocks and profiting from same. Some involve options, some holding the stock for short-term run-ups in price But the thought popped into mind that one might gain some stock with a $0.00 cost basis, if I'm thinking this through correctly.
Basically what's involved are three dates - the announcement day of the split, the record date, by which you have to be holding shares in order to qualify for the split, and finally the ex-date when the split actually takes place.
Now if one were to buy 100 shares of XYZ a few days before the record date, and then sell all the shares after the record date, but before the split date, you'd then have a $0.00 cost basis as you wouldn't be holding any shares anymore. A few weeks go buy and then, all of a sudden your account suddenly shows 100 new shares of XYZ from the split (assuming a 2:1 split). Would these then have a $0.00 cost basis? In other words, selling these at any profit would be 100% profit, correct? Meanwhile you've freed up the original capital that you invested to purchase the initial 100 shares with so that you can repeat the process with another stock!
Whether you'd want to AIM the "free" shares or not, or just hold until you hit some profit target % would be your call.
Does this make sense or is there some devil in the details I'm missing here?
Curious...
Best,
AIMster
A realistic view of last week's market:
Wheeeeeeeeeeeee!!! Can't wait 'til next week!!! <grin>
Best,
AIMster
I bought CHY yesterday at $11.55 and $11.59. I just had my first AIM sell for $14.84. A return of 28.48%. In one day. This is a high yield fund?
Congrats. My best performer in terms of 'rocket-like' recovery is NCV up 15.58% as I write this.
Best,
AIMster
Re: CHI.
Well then, we're now a trio in this one between me, yourself and TooFuzzy (if not others).
As I'm using more of a Synchrovest approach instead of AIM right now and with FOLIOfn not having any commission charges on a per transaction basis I can make very modest increments with no adverse cost impact. So I'm going at a faster than 30 days rate but doing so in very small steps. Likely achieving the same objective, but most grateful to have the cash around to open the scoop on this downtrip!
Best,
AIMster
I have to remember to slap myself and sternly say.... " Do not buy individual stock! "
Hi, TF,
I hear you. Fortunately I was spared the AHM meltdown, though I paid my dues earlier this year with New Century and NovaStar. As an aside on the news last night they mentioned CountryWide as possibly sinking into the abyss as well.
I dunno. Without wanting to sound too much like a heretic perhaps one should limit one's AIM use to funds which may well be expected to have longer duration than any single company. On an individual stock, however, take an initial position and that's it. Sell at a stop loss if you feel you must or ride it out and sell it at profit. If you sell at profit take such and start again with another individual stock, or, with enough profit and capital, invest in two the same way. In other words you're pyramiding your growth and limiting risk to the amount you've invested. Keeping such as a small part of one's total portfolio will also minimize damage to the whole thing in an AHM type situation. Certainly tools exist to help one find candidates. Mark Hing of Automatic Investor fame, for example also offers a Value Stock Selector where he applies Benjamin Graham's selection ideas along with some of his own refinements to help screen through what's out there for stocks to consider.
After the last week or so I don't have enough extra right now to implement such a strategy, but I think it's one that may have some merit - or knowing this group - at least provoke some discussion! <grin>
Best,
AIMster
From the "gee, isn't this a great time to float new shares" dept...
Zweig Fund late last Spring set off a spin-off of rights that allow a person to purchase one share at a specific price per five rights held. The estimated price is $5.75 per share, and the fund is now trading at $4.92 per share. I think they've a provision to recalculate a final price based on recency of price around the cutoff date, but my guess is the reality of the last couple of weeks has largely wiped the eager anticipation off of some of their faces.
My point is that even closed-end funds, which are normally rather placid can come up with some interesting events also. Meanwhile my purchasing department is liking these prices even more than the offering so some of the scared were glad to yield their shares to me!
Well, even some of the investment letter pundits are starting to sound like they're picking up your mantra of "buy from the scared, sell to the greedy!"
This an excerpt from Keith Fitz-Gerald of Money Morning
"And the reason is actually quite simple. One of my contrarian-oriented colleagues here at Money Morning loves investing adages, and one of his favorites is the old French saying: Achetez aux canons, vendex aux clarions - which translates roughly to "Buy on the cannons, sell on the trumpets."
And as I like to say, history shows time and again that investors with the "intestinal fortitude" (i.e. "guts") to wade in and buy when all hope appears lost are almost always the biggest winners when the sun is shining brightly again. If you buy on panic, you're likely getting bargain-basement prices, and that can only magnify your gains when the markets inevitably rebound.
Louis Navellier adds:
Fellow Investor,
I know this week has been unnerving for many.
But please don't do anything rash. There's a silver lining to this mess and we're going to take advantage of the market's sell-off. I urge you in the strongest terms stay the course with us.
If you do, you could find yourself 50 percent richer in the next six months as the majority of investors find Wall Street a better place to lose a fortune than to make one.
Before I give you my strategy and how you can profit, let me tell you exactly what I've been telling the thousands of individual investors I talked to this week.
1. The sub prime credit/liquidity squeeze has the world rattled. From Paris to Pewaukee investors are climbing over themselves to get out of the market
2. The end result has dragged down good stocks--like the high earnings moneymakers we own--creating buying opportunities that market has not recognized yet.
3. When the dust settles and the risk has been shaken out of this market you are going to see the market bounce back to 13,500 then 13,800 then to 14,000 and beyond. Our stocks will be among the biggest profits leaders.
So please--whatever you do--don't even think of running to the sidelines. This is NOT the time to sell out of our stocks. When the Fed drops interest rates in September as I've been predicting all year, all of the hoopla over the sub prime crisis will pass.
Investors who are taking this opportunity to add their positions will be smiling all the way to the bank while those who cash out will be licking their wounds for some time to come.
Like you said, "Buy from the scared, sell to the greedy!"
Best,
AIMster
Hi, Tom,
Inspired from your main-board posting on complacency:
http://investorshub.advfn.com/boards/read_msg.asp?message_id=21968940
The complacent mind
Tries to shut the world's din,
Ordering chaos.
It always happens
To the other guy,
Oh no, never me!
Tell that to people
Rush hour, Minneapolis
Bridge or N.Y. steam,
Brooklyn tornadoes,
Heat wave in much of U.S.
Hurricanes silent.
Politics normal,
Propaganda and the truth,
Mixed by media.
Markets: up or down?
To transcend the confusion,
See the whole picture:
The glass and milk are,
Whether half full, or empty,
At that point: the same.
Accepting change is
To accept the universe
In this, you prosper.
Question everything!
That avoids complacency,
Starts enlightenment.
Best,
AIMster
A good article about how to have spotted the AHM debacle in time to have gotten out:
Thanks!
This one seems to be going down the same path blazed by New Century Financial a few months back. I got burned once so fortunately I missed this wreck altogether!
AIMster
Another crash in the subprime mortgage house of cards... Now reaching overseas to a bank in France...
Details here:
http://dealbook.blogs.nytimes.com/2007/08/09/bnp-paribas-freezes-funds-on-subprime-woes/
>>>>Airport security officials are at a loss as to how the monkey made it through customs undetected, says Spirit Airlines spokeswoman Alison Russell.<<<<<
What if they missed one of those really dangerous monkey bombs! or monkey terrorists! or something else stupid I just couldn't come up with.
Considering that monkeys can be vectors for such horrid killers as the Ebola virus the thought is truly scary. Given the jet age, that's one of the downsides...
<OT>
re: "Maybe minstlman's monkey!"
Well we know you're a more upstanding character, with a decent monkey, unlike this other fellow who landed in LaGuardia...
Passenger smuggles tiny primate under his hat onto airplane.
A trip to Lima, Peru had one man attempting to bring home a unique souvenir: a tiny monkey. The man tried to smuggle the fist-sized marmoset back home to New York City, but wound up busted when the little guy showed himself to fellow flight passengers, reports Xinhua news service. The man, who was unidentified, managed to fly from Peru to Fort Lauderdale, Fla., without officials spotting his little stowaway. But after waiting several hours for a connecting flight to LaGuardia Airport in New York City, the man and his monkey hit a snag. The tiny marmoset, probably bored from hiding under a hat for hours on end, emerged from his hiding place during the second flight. Passengers around them couldn't help but notice the little guy perched in the man's ponytail. Some even asked him whether he knew that there was a monkey in his hair.
By all accounts the stowaway was exceptionally well-behaved, spending the remainder of the flight in the man's seat. But though the monkey was on his best behavior, airport officials were still waiting when the plane landed to take the strange duo into custody. The man was taken away for questioning and his monkey has been checked over by New York City's animal control agency. The baby marmoset has been given a clean bill of health, but will remain in quarantine for 31 days. If he's deemed healthy after that point, he may end up in a zoo. Airport security officials are at a loss as to how the monkey made it through customs undetected, says Spirit Airlines spokeswoman Alison Russell.
Talk about monkey business!!
AIMster
Found her. Just back from a brief 'visit'. Not the prettiest of stories. I am even more amazed that A.I.M came out of WV. You wouldn't believe it!!
So, do we get the details here or what?
Curious AIMers want to know!
Best,
AIMster
Heck .....Ya just pick a method you are comfortable with and stick to it. Anything else is data mining. One may work better for a few years and then another or one may work better with one stock than another.
Well it can be data mining if you're looking to obtain a particular result. I was doing a comparative view of the three methods of DCA, Synchrovest and Twinvest. Following the rules of each, starting at the same point, using the same data, where would you end up following each method? That was the only question I was really trying to answer. The basic result ends up being where DCA and Synchrovest leave you mostly in the stock, whilst Twinvest leaves you mostly in cash. Given the combination of fund, time and amounts I was using, this result is the only conclusion that's reasonable to draw given this particular set of parameters. Change the stock, change the monthly amount, use adjusted, rather than closing price, and yes, you may get different results. The other broad conclusion that both of Lichello's algorithms perform better than DCA is not unreasonable, though circumstances in other conditions may well prove otherwise.
Comradelenin was asking which path upon which to embark. I was merely trying to shine a light down each one to see which might be the most fortuitous. No guarantees on any of them, of couse, but it's useful to see if any proverbial goblins are closer or more distant.
Best,
AIMster
To properly evaluate any timing method, you have to include dividends unless you are evaluating securities that don't pay them. The only totally accurate simulation is one that a) accounts for the reinvestment of dividends and b) the earning of interest on the cash reserves.
I hear what you're saying. Ideally the simulation should look at the given dividend being paid on the shares owned (which qualify for a dividend) calculate the number of shares said dividend would purchase, then "purchase them" as part of the simulation, in effect, doing the actual dividend reinvestment. This is a bit more difficult to implement using the price data that Yahoo supplies in a price download. Ideally, programs such as Automatic Investor should do this as well to give a true apples-to-apples comparison.
However, my original intent was to answer comradelenin's question as to which method to use by looking at what periodic savings would do against a given investment, straight dollar-cost-averaging, Synchrovest or Twinvest. I stand by my basic conclusion that Synchrovest generally seems to get one more invested in the fund (ASG), Twinvest at a $300 monthly level leaves one more invested in cash. Given that both synchrovest and DCA leave more in the stock than out of it, their final results would be changed by the dividend impacts yes. I may be able to re-run those two using the adjusted prices. I think the overall results would be the same, only the amounts would vary in terms of ending shares and final values. But the relationships should still be similar. Film at 11.
Best,
AIMster
Why would you ignore dividends? They are a very real part of return, especially with this fund, that currently shows a distribution rate better than 10%. Unless you factor in dividends, you can't really declare that one method is superior to another. In my opinion, of course.
In doing an analysis of an accumulation program, you want to see approximately what the person would have paid at that time for shares. Thus, I (and Lichello) use the closing prices. BTW in his day I doubt he had ready access to dividend-adjusted prices anyway.
In other words say in 1997 the closing price was $9.12 per share. So, a $300 investment would get you 32.89 shares (if you don't mind the fractionals). Now, the adjusted price is $3.18. If I used the adjusted price I'd be starting with 94.34 shares! So, going forward, my amount of shares would be off considerably relative to what someone would have actually had, rendering the tests somewhat bogus, at least as far as actual position sizes, though they may well have been more accurate from a dividend perspective. Depending on what one is measuring for, I suppose.
Best,
AIMster
AIMster, I don't think it's a house of cards. The problem with these mortgage companies is not just the quality of the underlying credit in their portfolio, it's a function of the high degree of leverage used. In other words, when the collateral value of the mortgages dropped as a result of the deteriorating real estate market, they were undercapitalized. Another firm with adequate liquidity could abosrb such loans at the RIGHT price, and make good money.
Hi, AH,
I hope you're right!
On the other hand Reuters gives us:
NEW YORK, Aug 5 (Reuters) - Bear Stearns Cos. (BSC.N: Quote, Profile , Research) said on Sunday that Warren Spector has resigned his positions of president and co-chief operating officer, member of the executive committee, and member of the board.
The resignation follows Bear Stearns' assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Bear Stearns has struggled with redemptions at three hedge funds investing in repackaged mortgages. Two made bad investments in bonds linked to subprime mortgages, or high-interest loans to people with poor credit, a sector where defaults have surged.
James Cayne, chairman and chief executive officer of Bear Stearns, said in a statement on Sunday: "In light of the recent events concerning BSAM's High Grade and Enhanced Leverage funds, we have determined to make changes in our leadership structure."
Fingers crossed!
Best,
AIMster
Thanks for your work on ASG. Just ran a quick AIM test on PCA, same dates, 50/50 by the book, $5 per trade, 10% safes, etc,,, 1623 shs to start at $3.08,, results = AIM $6777 profit,, 10 buys,, 17 sells,,$500 trades or higher,,,ROCAR 126.3%,,,Avg risk 53.7%,,, this of course uses the adjusted prices,, Aim on, Ken
Hi, Ken,
Thank you as well! My first premise was to keep using Synchrovest or other plans from start to finish. Knowing, however that the suggestion's been made often to start with one of these incremental building plans, then switch to AIM, I tried that off of the Synchrovest data.
Startng in Aug, 1997, one can cash in ASG in March of 2000 at a 14% gain with a total combined value of cash & ASG of $10,629.95. Rolling that over into a "Classic" AIM 50/50 10% SAFE, 5% min trans yields a 31% gain or ending portfolio value of 13,967.78. 51.07% ROCAR gain. Taken through 1 Aug 2007 on monthly transactions. Presumably in the meantime one could have taken the monthly contributions one had been synchrovesting and started a new program and so on.
So the two techniques may well go hand in hand.
Best,
AIMster
Comparative analysis:
The other day I spoke of comparing Synchrovest with Twinvest. Sat down and did it this morning. Used fund ASG since it has a long history, monthly pricing from 1 Aug 1997 through 1 Aug 2007 which should give it a fairly long stretch through some up-and-downs. Used an investment amount of $300 per month. Used the closing prices for the per share price, not the dividend adjusted price. Data downloaded from Yahoo finance.
Results:
Dollar Cost averaging:
Total Invested: $36,300.00
Shares 5,058
Cost/share $7.18
Stock Value: $29,740.80
Gain/loss -18.07%
Synchrovest ends here:
Total Invested: $36,190.77
Shares 5,197
Cost/Share $6.96
Stock Value: $30,558.36
Credit Balance $109.23
Total Value $30,667.59
Gain/Loss -15.56%
Twinvest ends here:
Total Invested: 11,036.03
Shares 1,652
Cost/Share $6.68
Stock Value: $9,713.76
Credit Balance $25,263.97
Total Value $34,977.73
Gain/Loss -11.98%
So it seems with this particular fund and time range Twinvest looks better in the absolute sense, less loss, greater ending portfolio value, however this position is gained at the expense of a much lower position in stock compared to cash. Potentially Synchrovest may do better in a more extended time frame. The -15.56% loss, BTW is around a 100% improvement from the -31.21% loss as of 1 Aug 2006, so Lichello's recommendation to keep on keeping on with a program in the face of losses seems to be a valid one.
The Twinvest algorithm never takes advantage of the building up of cash at the $300/month level, the maximum being called for is $139.88 on 3 July 2006. Extra cash gets put in if the amount requested goes above the maximum investment. (in this case $300).
So I'd say if you want to be more flush with cash, use Twinvest. If you're willing to tolerate a bit more market risk, Synchrovest seems to be better. Both, you'll note are improvements over Dollar Cost Averaging - which is Lichello's basic premise anyway.
After I posed the questions last night, I studied the AHM chart somewhat. OMG! What a downward spiral! On the other hand, looking at their actual dividend payouts, I can understand how one might be willing to chase this one down (in a hopeful way).
That's how I got scorched earlier this year with New Century and NovaStar. These implosions have hit these companies so fast that there hasn't been time to orderly adjust - smooth out the bubble, rather it's like the end of any mania, South Seas, tulip bulbs, what have you - no one wants to be left holding the proverbial bag. So you've the stampede effect like yelling "fire" in a movie house. Some people have just gotten financially crushed. Fortunately I wasn't hit too badly, but enough to move me more out of individual stocks and into the more relative safety of funds and ETF's.
The bigger question still out there is how many times have these mortgages been repackaged and resold? In other words, is this portending a house of cards, a few of which have been knocked out of the arrangement, so the structure is still standing, if teeteringly so? How many banks, hedge funds, etc. all have a piece of this? Scary.
Best,
AIMster
Further, it's not that important. One might also consider Edleson's 'Value Averaging'. The point is that once you invest money, it becomes a lump sum investment. In the beginning, when timing is most important, the amounts are trivial. Over time, the lump sum amounts dwarfs the amounts being timed. It's more important that you begin an investment program, than it is which method you use.
Good points. Still, we know that Lichello's proven that basic Dollar Cost Averaging, the most widely-touted form of periodic investing has serious flaws that his algorithms seek to correct. Therefore, in considering various alternatives, Synchrovest, Twinvest, or Value Averaging, one is desirous to find the algorithm that will give the best return long term. I believe Lichello's basic premise of keeping some cash aside to buy more shares when they're discounted is a prudent one, provided that what you're buying into will, at some point, rise in phoenix-like fashion from a decline and reward you with capital gains far in excess of what you might have otherwise obtained.
Over one's working life one will set aside $X amount of money. The most judicious application of that money may make quite a difference down the road. As to where the market will be in the future, likely it will do as it does now, fluctuate. The market will, in some fashion or other, absorb the baby boomers and those that follow. With patience and perseverance we may get to enjoy the ride after all. Better than the alternative, that's for sure!
Best,
AIMster
Whish is best Synchrovest or Twinvest?
Comrade!
Love your 'handle' for someone's who's interested in working the better part of capitalism! <grin>. Like me, wry humor, or serious representation? In either case, you do ask a bona fide question worthy of an answer:
Lostcowboy started a board that considers that sort of question. It can be found here: http://investorshub.advfn.com/boards/board.asp?board_id=966
While it hasn't seen so much activity lately, I do check it from time-to-time, as likely do others. I'd start by reading from posting #1 forward. If after so doing you still have questions, post either here or there and someone will no doubt help to find an answer (or 2 or 3)...
I've been experimenting with Synchrovest of late. I'm working on a variant that uses virtual shares to represent an investment representing the whole value of the portfolio, instead of each component. This way I can have 1-150 actual holdings behind the virtualization wall, so to speak and Synchrovest will tell me how to best allocate the amount of cash I contribute regularly. Where I allocate the money, into one or more holdings, that's my call. This combines Lichello's Synchrovest idea with his later AIM idea of AIMing the whole portfolio instead of each item separately.
One difference that I've seen commented on is that you make one Twinvest code and use that as a constant, whereas Synchrovest calculates a new multiplier each time and thus may be a bit more responsive to changes. Whether one is better than the other or not would take some comparative study. Take the same investment, same time period, same investment rate and run the analysis using each method. Would be an interesting exercise, if I could find enough free time to figure it out. And even then one might need to run several tests using variable data to see if there's a consistent benefit to one or the other.
Best,
AIMster
AHM is a great example of a yield trap...I have seen lots of these companies never recover (yep, I owned a couple of them).
Well, AH, if it's any small consolation, you haven't been the only one - New Century Financial and NovaStar Financial (NFI) did me in for a bit. The former is now totally 'toast' and the latter shows 137.9% dividend yield! Narf, nah, in this case make it barf, instead!!!
Best,
AIMster
Not exactly related to our usual topic, but I just realized that the song by "Talking Heads" of a few years back is actually a haiku form:
Watching days go by,
Water flowing underground...
Same as it ever was.
Interesting...
Mortgages sub-prime,
Easy money, life sublime!
Till the loan came due...
Robert Lichello, meet Emeril Lagasse..
One of the big changes in Robert Lichello's books between SuperPower Investing and How to make $1,000.000 is a shift from investing in single stocks or individual funds, to investing in the portfolio as a whole, not being concerned with the individual items as much, per se. Of course he also allows people to do individual items, but I think his intent was simplification, as that seemed to be one of his underlying themes.
Mr. Lichello apparently never worked much with personal computers, indeed back in the day of the late 1970's and early 1980's they were much more limited in capacity and at much higher cost than they are now. Thus his use of paper-and-pencil with a calculator to perform one set of calculations instead of multiple per holding would have been a relief!
Nowadays, we do have more powerful systems and can take advantage. So, one thing I'm working on now is to "kick Synchrovest up a notch" (thank you, Emeril), by applying it to the whole portfolio instead of each holding individually. This is done by taking the sum of the original cost from all the holdings and working out an appropriate price level and thence a corresponding number of virtual shares representing the whole portfolio, much like an open-ended mutual fund. As one makes successive investments the values change and one can calculate appropriate changes in per-share cost compared to the starting point by buying additional 'shares.'
This should favor long-term investing as the Synchrovest algorithm has you exit when the individual holding reaches 100% profit. Now this will exit when the entire portfolio reaches 100% profit - which will likely mean that some of the holdings will be well in excess of 100% gain.
Of course, doing that would make for one hell of a capital-gain event so I'd likely do some sort of re-evaluation or (pardon the expression) SynchroVealie, and work it out from there. But I think it might be some time before that day arrives.
When an AIM directed buy is signalled that trade size amount of un-leveraged holdings are sold and the proceeds used to buy a twice leveraged holding. When insufficient un-leveraged holdings are available then we sell un-leveraged/buy leveraged up to the un-leveraged limit and ignore any further trade size indication (maximum total leverage = 200%)
I think I'm following this...
But, wouldn't you want to use a 2x inverse fund as the one to leverage into? Otherwise wouldn't you just be multiplying the effect of the down move? Or is that the idea?
Say S&P 500 fund you buy initially at 100. Drops to 90. If you sell out of the unleveraged to buy the leveraged, aren't you then selling at a loss? and if you buy a 2x inverse fund, won't that take you lower faster if the price then drops to 80?
On the contrary side if you buy an inverse fund you're still selling from the unlveraged at a loss, but you buy the 2x inverse and it goes to 80 you'll have made some on the inverse fund as it's continued to move down.
Perhaps it would work to have a cash reserve and an inverse 2x fund as the pair - but use the buy-and-sell signals from the unleveraged to govern the movement of cash in and out from the leveraged. That way the unleveraged is used more of an indicator than an actual investment. One could perhaps increase one's holding in in when it's down from accumulated profit from the activity of the 2x inverse and cash.
Is this closer to what you're pondering?
AIMster
letting the market govern asset allocation
Ahh but on further thought you still need to have an indicator of how much to initially buy of each asset - the initial blend to start of with.
Point taken. Though I was thinking of a more of a "simpleton's portfolio" to use Bernstein's term of starting each position at equal value and let the market sort it out moving forward. Less calculation that way. <grin>.
Best,
AIMster