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Doh
Just had an unexpected sale on Indophile Resources (IRN.AX)which I had set as a market order at $0.84, the stock had been trading at around $0.79 for most of the day it must have just popped up at the end.
Must rap the sales guy around the knuckles as he managed to place the order and leave one share unsold as he didn't check how many were left to sell, doh.
So I now have one share of Indophile Resources in my account worth 80c!
Overall not a bad run on this stock, bought at 35c a few months ago and sold out at 84c today.
Started a fresh account on Andean Resources (AND.AX), bought at 41c which I'm hoping is going to be a floor price as the stock is being stalked by a predator in the form of Kingsgate Consolidated (a gold miner). I'm hoping this will bring more predators out from cover and get the price bid up higher.
Regards
Neil
Salary replacemment
I would be interested to know (if people are happy to disclose) what percentage of return does AIM provide against your annual salary.
I think it can be good benchmark to do a comparison as you can then say to yourself, how much time do I put in per week to earn my salary against time spent organising portfolio.
I do realise of course that the time spent organising the portfolio and updating AIM also takes on more of an interesting hobby rather than out and out work.
The calculation would be total capital gain + dividends divided by salary. I'm not of course taking into account the capital reinvested once a stock falls as that will then take part in some future capital gain.
At the moment AIM (profit+dividends)/Salary turns out a small 12.5%, I am hoping this will begin to grow over the next few years.
Regards
Neil
Equinox Sell
One of my micro AIM stocks sold today. I'd purchased $1000 of Equinox Minerals (EQN.AX) at $1.03 with the intention of buying more at a better price, that didn't happen and the price rose over the last few months.
My rule then is to try to sell half the position if I can get a near doubling of price.
On the thursday before Easter it closed at $1.91 so I placed a market order in to sell at $1.99.
On tuesday I had to rub my eyes a little at first as I looked at the price around an hour after open and the stock was up around 25c.
I was at first a bit sad that I'd undersold them, but, better check the open price I thought and woopee, it opened at $2.16 so I got an extra 17c/share. Promote that salesperson!!!!
They are now trading around $2.30, as far as I can tell, all the excitement was caused by the announcement that they are going to be staring development of the largest copper mine in Africa.
It's at times like that you wish you had $10k's worth but, as we are taking a risk averse approach we should acknowledge that the gains will also be trimmed to compensate.
Regards
Neil
Australian Report 8th-April-2006
Well, who would have believed it, back around 6 months ago, while having coffee and discussions about where the markets were heading we thought it would be fun to pick a figure for where we thought the Australian All Ordinaries Index would be by the end of the tax year (June 06).
AT the time the market was at around 4600, I reckoned that as we had had such a spectacular run over the past few years that we were due to probably go sideways to down for a year or so.
Well, just shows how you should never second guess where markets are heading.
We are now just below the 5200 level, I guess I have egg on my face now.
On reading the Financial Review today it appears the daytraders are back again, the boards are alive with new subscribers hyping mining stocks. I guess you could say the speculative side of the market has come out of the bushes.
Here is a reason I like AIM.
I started to buy a biotec stock called Norwood Abbey, I first purchase $1000 of stock at 48c, my next purchase of $1000 was at 35c, next I had a sale of $1000 at 62c, just this week I had a purchase of $1000 at 33c.
So from my first purchase price at 48c to the current price at 33c , a loss of -31% I actually show a slight gain of 4%, now that is the power of AIM, well I'm impressed anyway.
Regards
Neil
Hello Adam,
From my reading of the manual after I installed it, the following functions work in the following way.
The volumizer takes a moving average of the volume and if a buy is signalled by a price rise or fall and it is done one below average volume then the signal is ignored.
The MACRO filter is a simple moving average crossover to indicate trend. This is meant to keep you in the trade longer and not trade contrary to the trend, ie give a buy while the price is rising or a sell when the price is falling.
That's about it as far as I am aware.
Regards
Neil
Hello Jack,
As I mentioned in an earlier posting, I don't believe I have any true "penny" stocks even though Australian stocks trade at prices that in the U.S. would be regarded as penny stock.
That is a very interesting result you posted though and I believe a very useful way of raising money to use with more established "blue chip" stocks.
We all emphasis buying quality stocks to AIM because we are long term holders and we don't want our stock to go belly up. But quite a few "Blue Chips" have done just that,so, we still have to take care.
I think part of our job, whenever we buy a stock is to say "What am I prepare to risk with this one"
If you were to risk say a maximum of $2400 on a penny stock and have a very wide hold zone you may be able to turn that small stake into quite a substantial position and then when you hit a target of say $10,000, sell out and put it into something safer.
I've just run a backtest on a stock MEE.AX from jan 2000 to present. This stock trades between 5c and 15c. The annual AIM return is 16% buy and hold = -2%. I'm sure there are many examples like this and as we know, low priced companies are far more volatile.
Regards
neil
Hello Toofuzzy,
That is what I would have thought also but in this case it didn't.
When I used the buy shares option and entered 3000 @ 50c, my next sell point was at 91c, this was a bit too far away for my liking especially as it had just moved up from the 87c before I entered the buy.
When I used the Add shares option the hold zone came down to 81c which seemed far more reasonable.
Maybe Mark might like to explain the differences between the two and which should be used under what circumstance.
Regards
Neil
Autumn is here
Hello Tom, I got my folks to visit me from the UK in March which is our first month of autumn but you wouldn't know by the weather.
The temperatures were between the mid 20's to mid 30's (Celsius), every day was clear blue sky.
With most of the trees being Eucalypt over here they keep their leaves all year around, or rather they continuously shed both leaves and bark.
The only way you can tell the season visually is by the imported trees that still shed their leaves at the appropriate time.
There are quite a few different climates in Australia. During winter in Adelaide I have travelled to Brisbane and found warm sub tropical days which are just glorious. You can travel a further 1000km north of Brisbane to get to Cairns which is in the deep tropics and you will be in summer again (or dry season).
They just had a big cyclone hit the coast just south of Cairns did a huge amount of damage, wiped out the banana crops and all the other tropical fruits.
Regards
Neil
Hello Toofuzzy,
That wasn't a typo.
Automatic investor has two options, one is to Add shares to the account and the other is to Buy.
As the additional shares I got were through a special issue at 50c (when the market price was 76c) I chose the Add option rather than the Buy. The buy should be used when AIM directs a buy order.
From looking in the manual it says that if you use the Add facility the total value of the additional shares is added to the portfolio control.
If you use the Buy option, it increases P.C. by 50% of the value of the purchase.
I'd be interested in hearing more about what this difference is for.
Regards
Neil
Hi Toofuzzy,
I think I have the issue sorted out now.
I have added the shares to the account and increased the portfolio control by the total dollar amount spent.
The shares were purchased at 50c each while the current trading price was 76c.
My only mistake was using the current price rather than the purchase price when calculating the portfolio control.
Thanks for the help.
Regards
Neil
Hello David,
It is always a problem determining when to dump a stock for a better prospect.
Our main problem is that we can't forcast future volatility.
I'm assuming that the 4% return means very little trading activity? or is it just that you are at that point in the cycle where the return looks lousy but you have accumulated more stock?
Some stocks by their industry are less volatile such as Real Estate trusts, and other defensive type stocks.
Do the stocks you mentioned have a dividend? if so that would increase the return?
I have a few stocks that have not triggered any buys and sells for a few years but the dividend is good at around 5%, if I could also get them to trigger a trade once a year that would increase the returns.
LD AIM would still require the stock to be volatile enough to trigger a trade so even if I changed some of my stocks to LD AIM I still wouldn't be able to exit them.
Regards
Neil
Hello David,
That sounds like the ADD SHARES option in A.I.
Doing that shifts my sell point to around 91c from the current.
Ah, hold on, just had a brief revelation!!!!!!
Yes, when I add the shares to the account I should change the last price to 50c then do the add, it then uses the last known price to calculate the PoCo. I can then update with the true price.
It now gives me a sell point of 81c which is more realistic.
Thanks for nudging my thinking there David.
Regards
Neil
Buy on HTA, Sell TNE
Just when I thought the week was going to be dull and boring.
I had a buy on Hutchison Telecom (HTA.AX)on Monday. Initially I made a small purchase of $1000 at 33c, I've now purchased a further $800 at 26c.
Tuesday comes and I have a sell on Technology One (TNE.AX) I've had these shares quite a few years ans so it is good to finally get a sell out of them.
The buy and the sell have basically balanced out (except for brokerage).
I've just got back from a 3 week holiday, my parents visited from the UK and we did some touring starting in Sydney then going through the Blue Mountains. From there we swung south and went through the capital of Canberra and further south in the high areas of the Snowy Mountains. Of course being end of summer the ski area's were all closed and deserted.
After the drive through the mountains we headed west, swinging gradually north and heading back to Adelaide.
A very relaxing holiday, work came as a shock again.
Regards
Neil
To buy or add
Hi folks, I'm using Automatic Investor to AIM CFU.AX. This is a stock I bought in a float and it has traded down to around 42c as a low and is currently at 76c. I purchased down to 50c under AIM direction.
They recently listed on the LSE on their AIM (no, different meaning) Board raising another $82m and also gave Australian investors a chance to buy more at 50c share.
I purchased 3000 more. The question I have is: do I use the Add shares facility, which doesn't ask for a purchase price or do I use the Buy option which does ask for a price?
With the Add option it increases portfolio control by the value of shares added and pushed the first sell point out to 91c where as if I use the Buy option it has a sell indicated at 71c.
Which option would be the preferred one?
Regards
Neil
Hello Adam,
MRL isn't a penny stock, it is a company with revenues of well over a billion dollars.
A majority of Australian companies have share prices that range from 50c up to $20 far lower than US companies, I'm not sure why, it must be a historical thing.
I think I am safe in saying that no Austrlian company shares are over $100. But that does not mean that the capitalisation is any different as there are far more shares on issue, this improves liquidity.
RIO, with a share price of $75 has a capitalisation of $33 billion and is probably Australia's higest priced stock.
There are penny dreadful stocks around that trade below 10c, a few trade for even less than a cent (now there you would find some volatility).
I don't think I have any true "penny" stocks in my portfolio.
Regards
neil
Return of the Deep Diver.
Isn't it good when they come back. The stocks that you almost give up hope on an refuse to put any more money into, then they come back.
Mine was Millers Retail (MRL.AX) bought this initially through a broker over 2 years ago, I then started using AIM and bought as the stock started to fall, this time through mu online account.
It fell from $1.84 initial purchase price down to a low of 66c, my last buy was at 88c.
It has since recovered somewhat and I have had my first sale at $1.595 and it feels great.
Now, looking at this on a FIFO basis it looks like a loss from a tax perspective but I shall have to log it as a gain as the initial purchase was in a separate account, subsequent ones through etrade.
Very happy about that though.
Regards
Neil
Hello Newbee
I must admit, coming from the momentum side of investing it can be a little daunting to be told to buy going the other way.
But, you know what, each time I tried the momentum method of pyramiding into a stock (like they tell you to do) I would end up losing money as the stock would reverse hit my stop and make me close out with a loss.
I think the best way of dipping your toes in the market is to use the method I use with nervous people. I buy a small amount of stock $1000 then use a 10% safe buy and will only sell out on 100% gain.
What this says is basically I have no idea where the stock is going to travel next and I can't assume I have picked the best entry point. If it goes down I can get a better average price and build inventory.
I would do this more so on speculative type stocks and so far I have had 4 or 5 stocks that have doubled in price or better and I have sold out completely.
You always have to look for a company that has some qualities, such as real earnings or potential earnings.
Regards
Neil
Hi Aimster
I too was was in that quest to reduce monthly expenses and out of the three main untilities, electric, gas and telecoms it was the phone that was by far the most expensive.
I reckon this is wrong as you would think that once the infrastructure is there the costs would be mininal whereas you have to generate electric and also supply gas all the time.
Anyway I've been using Skype Out for a while to talk to my mother (she doesn't like the computer). I buy 10 euro credit and it usually lasts me around 3 months worth of calls.
There fixed line cost here is around $28, Broadband cost is $49.95. I've reduced my phone bill from an average of $50 down to around $30 but then I have to add back the amount spent on Skype.
Local calls are untimed here, distance calls are timed.
Just started a new LD-AIM for my friends account in AZZ.AX which was at a low point. They have a good cash position and are drilling a number of wells for gas deposits in Texas. I have some already and am waiting for them to get back to around 60c for a sell point.
Regards
Neil
Regards
Hi Jeff,
Do you guys have to pay a monthly rental for your telephone line?
If so how much does it cost you?
Regards
neil
Worked to death
Hello Tom, Well said
What has always seemed odd to me is that people will work themselves nearly to death to make money, but have casual disregard for what to do with it once it's been accumulated.
This is just so true.
My aunt and uncle have their home paid off, have accumulated around a similar value in the bank and a few stocks and yet they continue to work like dogs. They hardly ever take holidays and finish late on most evenings they are not the owners of the business they work for so there is no need to put in excess time for no reward.
Any yet every time I try to convince them to use AIM more actively the excuse is the same each time, don't have the time, too tired.
They are worn out by their day jobs and they just can't see to make the connection that managing their accumulated wealth more efficiently would ease their work burden.
My father always uses this saying "Work to live, don't live to work" many many people have this the wrong way around.
My milestones are going to be.
1. AIM produces profit of half my salary.
2. AIM produces equal amount of my salary.
3. AIM allows me to work 4, then 3 days a week.
4. When AIM allows me to fly business class, I'll know I've arrived ))
Regards
Neil
Hello Mark,
Maybe it takes until you are in your mid to late 30's before you have exhausted all the other methods out there of making a dollar.
AIM is at the end of the line, after diversions through, blind investing, momentum investing, warrants, stock options, options on futures, futures, CFD's etc....
It takes a while to get through all these and when you think you can help people short cut all this they think you have failed at all the rest so what use is your advice anyway.
In the end the only proof of concept is the bank balance and the amount of red or black ink on your trading returns.
My red ink has started to change colour.
Regards
neil
Hi Toofuzzy
This is an intersting thread about why we don't see (or hear) of more women in the investment area.
I wouldn't dare lump them all in the same basket as not being interested in finance as I personally know a couple that are active currency traders.
Other than that though I know very few that would get involved with the sharemarket. I went out with one woman that was activly hostile when she found out I invested money, she seemed to think it was only criminals that played the stockmarket.
I think despite the liberation that occurred in the 60's there is still a large dependancy when it comes to finance.
I was going to say that I was going to guess that in most marriages that it would be the man who would deal with the finances but then I thought about some of the guys at work who are married, especially some of the older ones.
From what I could gather they would hand over their paycheque to their wife each week and she would give them some spening money.
I think it was the other way around with my parents, dad earned the money and gave my mum an 'allowance'.
I think it would be great if there are any women out there who are active investors to post something to redress the balance and tell us the way things really are.
Regards
Neil
Hi Grabber,
Funny you say that about most of the posters being guys, where are all the women?
Surely there must be a few out there that use the system, after all, in all the studies done women are shown to be far more risk averse when it comes to investments, so that would be a huge selling card for AIM.
Women should be interested in this because it has all the elements that they purport to be looking for, lowers risk and allows self control of ones destiny if done in a systematic way.
I hope it isn't just laziness and apathy.
As for letting my friend read the book, I think the interest would hover around the zero level.
Giver her a soap opera any time.
Regards
neil
More thoughts,
I was just chatting to a friend who is about to lose their job due to more and more manufacturing going offshore to asia.
This is the main driver of my persevering with AIM to build an equity warehouse as I can see what is happening to the economy.
Dispite being in a "boom" everyone feels squeezed both for time and money.
Prices seem to be rising far faster than the CPI seems to reflect and this all leads one to suspect that the CPI is manipulated to be artificially low.
Why would one do this, well, there are many government payments that are linked to CPI such as pensions and unemployment benefits as well as wage negotiations. Keep CPI low and you keep your expenses down.
The equity warehouse is going to be my "real" inflation hedge and hopefully provide a bit of income as well so I don't feel pressured at work to work harder and longer. I don't want to be a rat racing around that wheel. Everyone around me seems to be heading precisely in that direction.
Home prices are back on the rise again and have become disconnected with rising income so people are taking on larger and larger debts in the hope that things will turn out right, the music will continue and houses will go up at a rate of 15% in perpetuity.
I feel like I am swimming against this mighty tide, everyone tells me that property is the only decent investment, it does get a little wearing at times, especially when one rents their home.
The disconnect is that I rent my place for $100/week, if I bought it with a 90% loan I would be paying nearly 5 times that amount, something is awry.
Oh well, it's getting late over here no so I'll quit for now.
Have a good friday over there.
regards
Neil
Last sell on MAE.AX
I've been trying to teach a friend of mine LD-AIM.
Unfortunately, you know the saying "Give a man a fish, feed him for a day etc" well I think I'll be feeding her fish for a long time.
As she only had a small account I diversified by buying a couple of blue chips, spending around total 6K then three small spec stocks spending 1k on each.
One of the spec stock was bought at 40.5c GGN.AX then I had to virtually plead to get her to buy some more at 30c. She bought a quantity more under protest.
The stock then rallied due to takeover activity so she sold some at 52c and is holding the rest.
Marion Energy (MAE.AX) was one bought at 29.5c. My idea was to purchase more using a 10% SAFE but only to sell if the stock price doubled.
It did better than that. The first sell was at 61c and she has just sold the rest today for 82c. Not a bad return for 3 months work.
Funny though how I find all this fantastic and yet all I get is a disinterested shrug and still no understanding of what I'm doing.
Is this the apathy that most of the general public has?
Cheers
Neil
Hello Tom,
I hope I'm not the lone 2% of Australian readership, it feel pretty lonely out here sometimes.
Always good to know there are other AIMers out there in the world. Wow, tied with the UK, there must be hundreds of the invisible ones, must be like shy possums.
Regards
Neil
GOOG Correction?
Just reading the bloomberg site and it mentions star stock Google has not met analyst forcasts, it has been punished in Europe and no doubt will be when your market opens, get ready for the ride.
Had a couple of AIM directed trades this week so far (gee, I wouldn't like to get addicted to this). First was a sale of Gallery Gold (GGN.AX)for a 61% gain, the second was a buy in Antares Energy (AZZ.AX).
I am not going to buy any more AZZ as it has hit my risk stop, this is the maximum amount that I limit myself to spending on an individual stock, just in case I pick up an son of Enron.
So far this year I have had about 4 trades, now I would like this to keep up at this level as it just enough to keep up the interest but not too many as to feel like getting swamped.
Regards
Neil
Momentum system.
I used a system a while back, nothing wrong with it in itself except you had to know when to trade it and there was the problem.
Nobody raised a flag to say, Yup, bull market starts now, nobody also raised the flag to say, direction change, bear market starts now.
These are all hindsight descriptions of a market that can be seen so easy after the event.
Anyway, sidetracking here.
They system was thus. Scan the stock (ASX top 300) using the breakout of a 80 day Bollinger bands 3rd standard deviation from the average. THis was meant to catch long term trends.
So on the break of the upper band buy, the stop is the 80 day moving average.
Now I started trading this system in march 2002, the Australian maket had recovered most of the losses post Sept 11th and was at all time highs ( a bull market?).
The market was scanned each day and any stock that fitted the criterial was bought, $5k per position until around 20 positions held.
After trading this system with discipline and absolute adherance the outcome was 18 losing trades in a row, out of the total number of 30-40 trades I had around 5 winners, my account was -$15k and I was mentally exhausted.
I ran the system for a year until March 2003. In hindsight, I started trading the system at the top of the market 3440 and ended when the market was 2690 ( might be known as a bear market). Eventually I closed out all my positions during March 2003. THis was the signal for the market to go into raging bull market which has taken it up to 4800 points now.
The question is, is it a good time to start off a momentum system again like that?
(I think not)
Regards
Neil
Rules of trading.
Hello Toofuzzy, Yes I have seen these rules and variations on them many times before.
They are made specifically for momentum traders I would say. These were the type of rules that I tried to drum into my head for many years. The only problem being is that they don't necessarily work.
They all sound fine and good and easy but in the conterintuitive way of life they are mainly wrong.
Jessie Livermore may have been the greatest trader of all times just because he made a fortune shorting stock during the 1929 crash, but a lot of the advantages he had in those days for forcing a stock down don't exist today.
He made a fortune and lost it all again when the rules changed, eventually shooting himself later in life.
I have tried the pyramiding rule where you buy a position then if it goes your way add too it (increase your risk), in all, not some, but all occasions I have ended up losing more that I made. I turned a position that had been capable of profit into one that lost.
The reason for this is so, thinking back to my momentum days:
You initiate a position, put in your stop loss, then a trailing stop to lock in the profits.
The stock takes off so you start to add to your position (I think I used 3 ATR's from initial buy point), suddenly the stock falls out of bed for a couple of days and triggers your stop, which is still around the level of your initial buy price. You exit the trade, outcome - a loss.
I agree with you, if you worked that way when it came to doing the shopping you would soon end up with the most expensive shopping bill ever as you would only want to buy at ever higher prices.
Momentum trading I reckon is a phenomenom that Wall Street drempt up to make people trade more frequently and generate much brokerage for all the firms.
OK so a few people from history can be dragged up to support the case, maybe they are just random in their success. I wonder if Warren Buffet would subscribe to buying at ever higher prices, I maybe think not.
One think we must not make the mistake of though is mixing methods used in stocks with those used in derivatives. Momentum trading is more applicable to derivatives trading as they are leveraged products and adding to losing positions in these can be disasterous.
Anyway, with the stocks we set a limit to our downside buying because we know that companies can blow up and we are fallible.
I have traded many ways and many instruments, stocks, warrents, options and futures and I can say with all this experience that AIM is the only one that is seeing my accounts generate consistant profits.
Regards
Neil
It ain't Half Hot!
Greeting from a steaming Adelaide, we have endured a whole week of temperatures above 100F, tomorrow it ramps up to 110F, not sure if I can take much more without air conditioning.
The only way to feel cool is to do strenuous exercise to get even warmer, when you stop it feels cooler, so I cycled 20km in 100F+ then did a gym session for an hour, now I feel cool
Anyway onto the markets, The Australian market just seems to keep on making new highs each week, this time we have broken the 4800 barrier. I feel a little uneasy though and definitely unwilling to open many new LD-AIM accounts.
Last one I opened was on Colorado Ltd (CDO.AX) a clothing/shoes retailer which has good earnings but sentiment was against them, the P/E ratio was a cheap 9 times and the yield is around 7%. It's 12 month high was $6.50 and I have purchased stock for $4.00.
I have also been guiding a friend through setting up some LD-AIM accounts over the past year. Because they had only a small amount of investment funds I (10k) I purchased 5 stocks, not split equally though. The blue chips had a larger outlay while I spent minimal amounts on some spec stocks. The speculative plays where I spent just $900 have doubled in value so I have sold out half the positions. I'll sell out the entire position if I can squeeze out another 25%.
I just hope they appreciate the management technique here and don't take it as a given that stocks can double in such small spaces of time.
Regards
Neil
Hello Tom,
Regarding order filling, you are indeed correct. The orders go in on a first in first out order at any particular price.
If you have access to a market depth screen you can usually see your order added to the pile shortly after hitting the place order button.
When I had access to a more price live data system called Bourse over here I could see each individual order at any price, for instance, say the sell price was $20, the number of seller may be 10 with an ammount of 120,000 shares to sell. My screen would show a breakdown of the individual orders in the order they were placed.
I remember once when I was desperate to sell a stock. Just before market open I put a price in which was the lowest at the time. Someone leapfrogged me and put a lower sell price in, I changed my order and put a lower one in again, they did likewise.
I realised that it was no use playing one upmanship game so changed tactic.
When the market opens the stock exchange computers (over here) take around 5 minutes after market open to do the calculations to determine the opening prices.
The stock I wanted to sell began with V so it would be towards the end.
I filled in my sell order at a the best sell price then waited with a stopwatch counting out 4 minutes, finger on the mouse button. When the watch hit 4 minutes I executed the order, a few seconds later the computer grabbed the order recalculated and I was first out that day.
It was quite tense and exciting, but then again, I was younger
Regards
Neil
Sell On IRL.AX
Yet another person wandered into the shop and purchased some Idophile Resources.
Now this was a stock where I put a small amount down $1000 with a safe value of 10% Buy 20% Sell.
The reason being is that as we all know timing the bottom of a move is near impossible so the chances that you have are about 33% (or rather 33% chance will move in the direction you want).
As I had put so little down I wanted to squeeze as much as possible out of the stock.
It went the right way and I didn't get chance to buy more at better prices so I set the hurdle high to see if the little upstart would jump. I wanted a sell price of double the purchase cost, I had to override each sell order until the level was reached.
It performed well. I purchased at $0.355 and sold half the position at $0.71. The stock owes me nothing now.
I have been getting wary as Tom's small cap indicators are saying the market has maybe had too good a run and needs to slow down for a while.
Regards
Neil
New Year Sales.
After a month of the shop being empty, no customers coming through the door, I suddenly get a rush.
Brushed the dust off the cash registers and sold some Gallery Gold (GGN.AX) 44% gain and some PMP Ltd (PMP.AX) 27% gain.
I did have another sell order placed but it stayed just a shade under trip level, that was for Indophile Resources (IRN.AX), maybe tomorrow.
Regards
Neil
Hello Grabber,
With your results that you mentioned I guess that you are talking about the value of your overall portfolio that is down?
As I have been discussing with Tom, maybe the more important parameter to look at is the cashflow ie the amount of sales during the year plus dividends and also your profit margin on sales. Don't worry too much about the overall market value of your holdings.
That is the way I have started to rearrange my thinking.
So far the figure that is important to me is, one AIM account has made a profit of $1299 on a turnover of $7660 (I sold on stock at cost as it had almost no volatility).
Another account made a profit $1863 on a turnover of $4156.
These are not large amounts and so the objective is to increase profit and turnover (sales) year on year.
I'm beginning to see more clearly what the game is about.
Regards
neil
Figures for clarity,
Just for clarity here are the figures using Mr Selenguts method.
Buy 5000 @ $1.00 = -$5000
Buy 5000 @ $0.67 = -$3350
Sell 10,000 @ $0.92 = +$9200
(because price is still below 12 month high another buy is made)
Buy 5435 @ $0.92 = -$5000
Sell 5435 @ 1.01 = +$5489.35
One oscillation complete, add up the cash amounts.
Total $1339.35
For 3 years 3 x $1339.35 = $4018.05
Full CGT as holdings were for less than a year.
Regards
Neil
Thanks Tom & Aimster
That's good to know that during your time using AIM that your market value has varied between 20% and 40% as that puts my account midway between those levels.
I would assume then that most of us that are using a similar model would have a similar range in market value.
A question I was going to put of him was one that we have discussed on this forum before and that was of tax efficiency.
We tend to hold our stock for periods that can be for longer than a year and hence get favourable tax treatment.
Umm, I have just been trying to do a like for like comparison of the methods using the following parameters.
A stock that oscillates from $1.20 to $0.60 on an annual basis.
Both programs start when then the stock hits $1.00.
AIM settings: 10,000 cash, 50% Cash/Stock allocation, 10% Safe
Selengut Method.
Buy $5000 of stock when 20% below 12 month high. Double stock Quantity if price falls to 33%.
Sell out when a 10% gain achieved.
Assume that the oscillating stock is at $1 in the decent path on Jan 1 of each year. Test ends after 3 years
From my rough calcs, if such a theoretical stock existed then Mr Selenguts method produces better cash flow but less tax efficiently.
Profit of $4,018.05, after tax (assume 30%) $2,812.56
AIM
Profit of $1216.20, After tax, approximately the same.
Now AIM still holds stock at the end worth $13,472 an unrealised gain of $3,472.
So, what conclusions to draw. For cashflow, the award goes to Selengut. For Net asset value probably AIM.
Of course AIM would squeeze more profit out of a stock in a long ascent while Selengut will have sold out and have to look for another stock with correct entry criteria.
AIM's cashflow gradually increases with time and time is required to make it work.
Regards
Neil
Market Value levels.
I was interested by a recent email from Steve Senelgut (he of The Brainwashing book).
He mentiones in there that he tracks both the total purchase cost of his equities and the current market value.
He uses this as an indicator to tell him how efficent his system is working.
He says that the market value is usually less than his total purchase costs and that when the market value is greater it is a sign that something needs to be sold off at a profit.
I checked mine and my market value was up 24% on one portfolio and 29% on another, so in his view I an running inefficiently as I have not taken enough profit to reduce the gap.
Any comments on that at all
Regards
Neil
The Heat.......
Greeting to all my fellow AIMers and hope you are all having a good Christmas.
The heat is beginning to ramp up over here. Today it was 34C (93.2F) and tomorrow it is getting up to 37C (98.6C)then luckily a respite for a few days before it starts again.
I still can't get used to Christmas in the heat despite having moved to Australia nearly 15 years ago. It throws my compass every year, I always forget to buy presents up until the last minutes as it is mid summer and not mid winter.
I think swimming may be the best way to cool off tomorrow, I'll test the temp of the water in the Southern Ocean, its always colder than the Pacific or Indian and each year older I get makes the temp feel that bit colder.
I am curious about the visitor counter on the web page and how often it is updated, if the numbers are correct there are a few others from this continent visiting the website but so far I have heard nothing from them.
Happy Christmas and New Year to all.
Regards
Neil
Hello Toofuzzy,
I agree with your sentiments exactly. That is one of the reasons I gave up options trading.
Options have to be monitored on a far more frequent basis because they are wasting assets. Decisions have to be made all the time.
I found that in the end, if you break it down into some kind of hourly rate amount, ie divide the earnings by the amount of time spent on generating the earnings, I think that unless you are very lucky you will find you are better off keeping your day job.
As with all aspects in life survivor bias throws up people that have made extaordinary amounts from options trading but they are the very small minority that have survived, most will have fallen by the wayside.
I realised this in time and got out while I still had some profits.
This is why AIM is so important as a risk management tool. While Motley Fool and others point out the spectacular profits companies like Starbucks have made for shareholders, how many similar companies vanished in a puff of smoke because of a period of bad management.
Be very aware of survivor bias an luck.
Regards
Neil
Hello Adam,
Choosing the right option is an incredibly difficult thing to quatify.
The first thing I would always look at is the "implied" Volatility and see where it sits in relation to where it has been in the past.
There is a saying that low volatility begets high and vice versa.
So, the ideal situation is to find a stock in a tight trading range where the option volatility is at the low end of its range.
If you manage to do this and also pick the correct direction you stand a high probability of making money.
If on the other hand you pick an option with a vol at the high end of the range you may get the direction correct but your option vol may decay and wipe out the premium.
Personally from all my time in the options market I would say that you will make a heap of money for the broker but little for yourself.
I came out ahead when I decided to quit, I quit because the amount of effort required and stress involved made me realise it was not a good occupation.
I have tried every option setup in the book from synthetics, to strangles around synthetics. Short call selling where you sell 5 different positions with a short expiry, theory being that most should expire worthless and those you buy back will have had enough time decay to not kill off your monthly premium.
But as I said before Nassim Taleb and Neiderhoffer story should be examined before deciding to launch into the lions den of options.
Regards
Neil