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Another Puzzle now you are in the mood.
This was culled from one of the Schwager books.
Apparently there was some quiz show on in the US where once the other contestants had been eliminated the winner would be faced with a final test to potentially win the prize.
The contstant is faced with 3 closed doors, he is told that behind 2 of the doors is a goat and behind 1 door is the big prize.
The contestant is asked to pick a door (this door is not opened)
The host then picks one of the other doors and opens it to reveal a goat.
The host then asks the contestant whether he wants to stay with the door he picked or if he wants to swap to the other unopened door.
What should he do to get the best probability of winning the prize?
Get going folks
Neil
Hi Tom,
That's when you have to deal with the unlimited loss liability of a potential unlimited upside.
Every time I have shorted a stock I have felt noticeable more nervous, because I know I'm really going against the crowd.
I stick to boring long as you can't short with an online broker, unless you use CFD's of course.
Regards
Neil
Hi Bosco,
This is not all my analysis, some of it has been culled from books read in the past on options probability trading.
With the drive tow work scenario that would not be a 50% probabability of arriving safely as you would have to work out the % chance derived from the accident statistics (quite difficult).
With the dice scenario. Each throw is independant of the last.
So you have a 16.7% chance of rolling a 6.
That probability does not change over each throw, what changes is the probabilty of consecutive 6's which then reduce to 2.7% and 3 consecutive 6's of less then 0.5%.
This isn't to say you cant do it, it is just that the odds are slight.
THis is kind of the point I was trying to get across.
The only difference being that a stock relies on conditional probability, ie what went before has an influence on what lies ahead wheras a dice cares not for what was thrown before.
Regards
neil
Small Account Efficiency.
I was thinking of a more logical way to look at LD-AIM and use of capital.
As always thoughts don't always come out in a coherent manner so apologies for that.
As I have mentioned before when using LD-AIM I have a variation in that I don't work out the number of sells first and then calculate the the amount, here are my hopefully coherent reasons why.
Assume we are purchasing a stock with a cost of $1. We setup our spreadsheet/software to pretend we have $6000 stock/ $4000 Cash, 10% safe and $1000 min buy/sell.
A stock, once purchased can do 1 of 3 things, go up, down or sideways.
So, you have a 33.3% chance of it going the way you want and a 66.6% chance of it going the way you don't want.
This would immediately say to me why risk $3000 at a 33.3% chance of a gain (going sideways, while not as bad as down still means a core of cash that may not be earning a dividend) when you can risk only $1000.
The stock would have to move to $1.30 for a sell to trigger, a 33.3% chance of hitting there, the next sell would be at $1.49 and a 11% chance of it making it there (0.333 x 0.333), the next sell would be at $1.72 and a 3.7% chance of getting there.
On the downside the but would trigger at $0.75, probability 33.3%,
Second buy $0.67, probability 11% and Third buy $0.61 at a 3.7% probability.
Outcomes.
If the 3.7% probability of the low price occurring your loss would be $667 if the initial stake was $1000 or
$1447 loss if the initial stake was $3000.
The average stock cost at 61c for an initial $1000 stake is 73c
The average stock cost at 61c for an initial $3000 stake is 80c
As I'm concerned with capital preservation I am more interested in the downside than the upside.
It will allow for greater diversification and more volatile stocks to be used .
By buying 3 stocks and spending $1000 each against 1 stock at $3000 you have lessend total risk. I believe the probability profile would be better as each stock has a 33% chance of gain (non linked) against 11% chance of a single stock reaching second sell point.
Hope my ramblings have not put you all to sleep.
Regards
Neil
LD V Regular
Hi Core.
I guess the way I would look at it is like this.
In regular AIM your initial outlay is larger and so unless the core is earning a high dividend amount why have it there.
I think it is better to have more opportunity (and less risk) to make 20% or so in capital gains rather than 5% in dividends.
When your amount of capital is large enough and you don't want to be tracking 30 or more stocks you way decide to filter the gains back into regular AIM and go for the dividend on the core with the icing of AIM on top.
Regards
Neil
NAL.AX close to next Purchase.
I must admit I do like this low risk method of buying into a stock.
I purchased some Norwood Abbey stock (NAL.AX)back in May at $0.48, an amount of $800.
I next got issued with a buy signal at $0.35 and I bought another $800, this was at the end of June.
The next purchase buy signal was at $0.315 which has just been breached but, taking a leaf from Toms experienced book I have placed a buy in at $0.29, more of a discount.
So, the stock has fallen from 48c to 30.5c, a loss of 36.5% for Mr Buy and hold, probably looking at a dollar loss of (assume $5000 stake) $1825 ouch. My current loss has been reduced to 24.6% of a smaller stake, dollar loss of $393.60 ) far more acceptable.
I still think NAL has prospects in the biotech area which at the moment is out of favour except in the largest stocks.
Have a good weekend folks
Neil
New Name
Hey maybe Aggressive LD-AIM needs abbreviating to ALD-AIM
First bit of joviality for the day.
Have a great day
Neil
Aggression LD-AIM
Wow with all this talk of aggression and AIM my method must have the most Grrrr.
It may only work with Australian shares as they are mainly low priced and thus far more volatile.
I have been purhcasing $1000 of shares, from there if it goes down I'll purchase more up to a limit of $3000 total.
If it goes up I'll see where the sell recommendation is, if it goes beyone there I'll do a virtual sell and draw a trendline under the stock so if I can squeeze more out using momentum.
If it doesn't reach the next sell point and breaks the trend then I'll sell and wait to see at what point a buy is triggered.
This is a method I have been using for some friends of mine that have only small amounts to invest, it helps diversify their holdings.
As many of the stocks will loose 50% or gain 100% in the course of a year I have very wide bands.
I will switch back to a more calm LD-AIM once I have built up accounts.
Just today I have bought an initial lot of Perseverence Corp. PSV.AX, this gold stock has oscillated between 20c and 40c in the last year and the year previously it oscillated between, well 20c and 40c again, wow almost a perfect Lichello example stock.
It's market cap is $177m so it is not a tiny minnow (not here anyway).
Cheers
Neil
Hello Tom,
I feel the same way about your sentiments despite the Australian market continuing to new highs.
I think the emotional side of investing has taken over and people are just buying without any regard to value.
ASX.AX (Australian Stock Exchange) only a couple of months ago which was looking pricey at $20 is now at $26.
It would be good to sell a few more lines before pulling down the shutters for a while.
There has not been a drop in the Advance-Decline line though so that means the rise is still broad based.
I usually use this as an leading indictor of a downturn.
Regards
neil
Mystery man
Hello All, thanks for those replies regarding pictures of Mr Lichello.
Isn't that just amazing that someone who revolutionised (in my opinion)investing by making it safer isn't more widely known or recognised.
As I have said before I have tested many trading systems in the past, with all they have worked for a period of time then they don't work.
There are many people that do the seminar circuit giving people expensive advice who make most of their money from the seminar rather than following their advice.
I like the way that Lichello stated that only we will be the judge of whether his method works or not.
Regards
neil
Photo,
Hi there,I'm curious, after being involved with AIM for a little over a year now and being converted to the cause I am re-reading the book that started it all.
The thing I was wondering is, does anyone know what Mr Lichello looked like or does anyone have any photos.
Considering what he achieved I am suprised I have never come across a picture of him on the internet.
Regards
Neil
Money Stash
Hello Mark,
My theory on why these people blow up and don't do the 'logical' thing and put money away is the old thorn of human fallibility, overconfidence in their abilities.
There have been many studies done to show that people who have positions of power have a confidence in their ability that is far above the reality.
One only has to look at the many companies that fail and the bad decisions that led up to the failures.
I have read (I don't know if this is a fact or not)that doctors for instance, make particularly bad investors due to their overconfidence.
Even the greatest financial minds that were behind LTCM couldn't overcome the fact no mater how brilliant, the idea that maybe, just maybe, they could be wrong.
Regards
Neil
Hello Mark,
Just refresh my memory, Taleb was the option trader that used to be a big seller of low priced options with a high probability of expiring worthless.
There was another guy when ended up being predominantly the buyer of these options.
For years Taleb made millions, had houses, cars, artworks etc. Then, the probability fat tails caught up with him and wiped him out and transferred his wealth to the guy on the other side who for years had been undergoing the death by a thousand cuts of buying worthless options.
A few weeks later he was rich.
Regards
Neil
London
There you go, almost as soon as I write about things that rock the financial markets with greater than normal probability it looks like London has had a few bomb attacks, the market currently down 170 points and falling.
A lesson in why option trading is very hazardous. I'll have to put out fires tomorrow.
Lets hope the injuries and deaths do not increase.
Coming myself from Manchester which experienced the IRA bomb attack on the city centre and seeing the mess it made you realise how cowardly these attacks are.
Regards
Neil
Options costs,
Hello David,
I think over the years I have tried every combination of option/stock play and on the whole I would say it is probably not worth the effort.
The only thing you could do is sell calls maybe at a strike near an AIM sell for roughly the Qty you wish to sell.
The only problem with this is that you would have to have a huge account to make it worthwhile.
A myth quite often floated is that it is better to be a writer than a buyer, this is exactly what it is, a myth.
The reason being that the finance markets do not demonstrate a normal distribution of outcomes.
To translate, it means that rare events happens with a frequency far greater than a standard normal distribution would suggest and as the option pricing formulas are based on a normal distribution that means that you will over a long enough period (unless very lucky) be a loser.
I am about to close my options trading account after about 5 years of being a trader.
During this time I have traded options on Crude futures, Wheat, Index's and stocks.
I have constructed sold strangles on synthetic positions, sold high volatilty while buying low volatility, calenders, collars.
All you end up with is stress and a rich broker.
My advice stick with AIM it is the best thing I have found so far.
Regards
neil
Hi Toofuzzy
You could use the Print screen button but it doesn't give you much control of the output.
You could copy it to the clipboard and down into another program then print but it would be far easier just to have a print dialog where you add some sort of formatting.
Cheers
neil
How long is Life
Hi Steve,
Over what time frame is the Life result you have?
Judging by the some of the comparison indexes it must be around Mid 2000.
I have a similar problem when calculating total returns over a period in that when I add a new stock that I didn't own in the previous period it kind of throws things and doesn't give sensible answers.
Regards
neil
Automatic Investor Print?
Hello Mark,
I have just been wondering if in the next service pack you might look at puting a print facility in the Portfolio Transaction chart.
This would be very useful not only for a printed record but it may even indirectly help you in the form of advertising.
I always want to show how wonderful AIM is but the only charts I can produce are from Excel, if A.I. could print the Portfolio Tranaction and Stack charts it would be a great way of showing off what the software can do and may even bring in extra sales.
I hate to use management speak but dare I say a win win situation
Regards
Neil
Screen-O-Matic Thanks
Thanks for the posting on the little volatility tool Mark,
I've downloaded it and am going through some of my stocks now to see how they measure up.
I am quite happy to see I have quite a few that are reaching across into the green zone, which means it's a good candidate for AIM/ A.I.
It gives a better visual display than trying to assess the volatilty by looking at the chart.
I did get into a bit of a gusssing game with it by looking at the chart first then trying to make an estimate of where the needle would land, on the whole I wasn't too bad
Thanks Mark
Regards
Neil
Over excited
Hi Steve,
I guess I get so inspired sometimes that I don't read things fully, apologies for that.
Are you guys on holiday over there on Monday?
Regards
Neil
Hello Grabber,
Hi Steve,
Good post regarding the LD AIM the only thing I would have issue with is one calculation, only a small thing.
You are correct that LD AIM produced 38% return but regular AIM's return should use the total value of remaining stock + cash.
This would give a return of 50%.
What I think you could conclude is that in this case, where the price initially rises, regular AIM will outperform but the caveat is that "with more risk"
LD-AIM as you have said before, reduces your risk but can reduce your reward, but, once again it can also increase your reward also.
This not the ravings of a man confused, here is how.
Assume you have purchased your LD-AIM initial stock, you get a few subsequent purchases, then a few sells, then a few purchases again.
If you then calculate how much cash you have put into this trading you may find it is in fact 0, and so, theoretically your return is ininite as LD-AIM is now just trading money extracted from the market.
Regards
Neil
Shipped out IVC
The warehouse had a last minute sale at the end of the day in Invocare (IVC.AX) for a LIFO gain of 43%.
Quite happy with that especially as I told the broker to place a GTC order at $4.23, the stock mainly traded lower during the day but just before the close it spiked up, the order was filled then the stock sank back again.
It always gives a warm feeling to find that you sold at the days high.
I've been preaching the AIM word to my aunt recently and I believe she is going to motivate herself to do something with it.
It is amazing how many people don't.
Has anyone read the reader comments on the Amazon website for the Lichello book?
There are a heap of really negative comments (all made in the '90's) about how it couldn't possibly work & how he was an idiot.
I would wonder how many of these momentum followers have survived the post 2000 bear rout.
Isn't it an irony that people think that if an idea is sold cheaply it must be rubbish.
I have spoken to many people about AIM and get that sort of feedback, I have concluded that "You can lead a horse to water but you can't make it drink"
People will pay $3000+ to snake oil salesmen for courses on Forex, Property, Options, Futures etc all because they believe they are getting exclusive information that will offer the Holy Grail of making money without effort.
It is good to have such a forum to converse with like minded people.
Regards
Neil
Hello Tom,
Thank for that reply, it is amazing when you have been using a method for a long period of time you can explain things with a simple clarity that suddenly makes me go duh, I just didn't think of it that way but of course you are right.
A stock can go all the way up and you will still have some if it goes from $1 upto $100 but looking the other way it can go from $1 to 0 and you will be bankrupt (of course you would have to be silly to keep ploughing in more and more).
So, is the rule basically, after 1 buy, wait for a month before further purchases, except if you get a sell in the meantime (would have to be pretty volatile)?
I think I must be on my first anniversary of AIM. I'm looking forward to going through a complete cycle.
My CFU which I purchased in float at $1, subsequent buys at $0.77, $0.64 and $0.50 is now looking better at $0.605.
I would like to see it go to it's first sell level at around $1.
Regards
Neil
End of Financial Year (Australia)
Well, 30th of June is the end of the Australian financial year and to cap it off I picked up some more warehouse stock.
I bought some more Norwood Abbey (NAL.AX). First buy was at 48c second 35c (I have very wide bands).
It is usually at this time of year people are thinking of tax efficiency and so stocks that have been trending down will be sold off as people exit the position and offsett the loss against a gain .
People usually hold off selling profitable stocks until into the new tax year as they won't have to pay tax until the next year so I'll be interested to see if the good uptrending stock start to mellow as people take profits.
More volatility in CFU.AX, after my last buy at 50c the stock went lower to about 43c today it shot up to 58c after opening at 45c, a gain of 24%+, how's that for volatility.
Regards
Neil
Hi Aimster
I agree in what you say about the reasoning behind Lichello's once a month checkup probably due to manual book keeping.
What as well we must realise is that it is a price based system rather than a time based one.
So if we only check up once a month it will iron out much of the volatility that we are seeking.
I must admit it does become a bit a competition to me to buy at the lowest price I can once a buy has been signalled.
If you could find a stock that oscillated between 50c and $1 twice a month and your checkups were once a month then essentially you have a stock with 0% volatility (you can't see the movement intermonth), by checking on a daily basis you have a dream stock.
Maybe Lichello, having experience long periods of bear market, wanted the cash to last the distance.
But once again it probably doesn't matter if you spend your cash balance on a stock in 1 week or 6 months as long as you have achieved the objective of lowering your average entry price.
After I have had an initial buy triggered, then maybe another in quick succession I may sometimes draw a trendline to follow the price down before trying to buy at a more optimal level.
Regards
neil
End of week activity
Well, you wouldn't think that there would be much buying activity going on with the Aussie market at near all time highs but that just shows how some stocks are in counter cycles to the main market.
After my sale of some SAI Global (SAI.AX) I had to purchase some more Ceramic Fuel Cells (CFU.AX) at 50% less than my initial float buy price, this is my last buy of this stock.
As they have now got their first Power & Heat units placed with some power companies for test hopefully this may bolster a bit of support for the stock.
Another purchase was of Sydney Gas Convertable Notes (SGLGA.AX).
I bought these in the float at 60c, had an AIM sell at 95c, the stock drifted higher then started to drift lower. Suddenly yesterday news was out that the Managing Directors contract was not going to be renewed and they stock plummeted.
This dragged the Notes down as well to 50c. I put a buy in at 49c for a minimum quantity just in case there was more downside to follow.
The fundamentals are still sound, they are producing coal bed methane that is sold to the large gas suppliers, nothing has changed in that respect.
The Notes pay 12% on the face value of 60c and will be redeemed at face value in a year from now (or converted whichever you choose).
Buying the Notes at 49c pushed that yield up to over 14% not bad as long as the company remains alive.
Cheers
Neil
Hello Jack,
I was very interested on your stock that fell 89%.
Did you ride it all that way down?
The reason I ask is that I know how psychologically hard it is to buy as a stock sinks lower and you wonder if you are doing the right thing.
How long did you have to wait before it came right again?
What settings did you use to control the purchasing of the stock, I would imagine that a fall of that magnitude would have made you run out of cash. I'm still trying to work out a nice balance between risk and return.
I have two stocks at the moment that are in similar state one is down about 70% the other around 50%. On both I am not going to spend any more and am just waiting for the recovery.
Regards
Neil
Zig Zag settings
Hi folks,
I remember a few posts on this a while back, I should have taken some notes back then but in my sometimes disorganised nature I forgot.
How do you determine the size of the zig zag indicator reversal setting in relation to your AIM settings.
Is it just a case of using a 20% reversal for the standard AIM 10% SAFE settings to determine the suitability of a stock for use with AIM.
I'm not forgetting all the other things to look out for I'm just interested in this from a visual so I can immediately determine if it is volatile enough.
Regards
Neil
Inflation Adjusted Returns
Hi Tom,
As you mentioned about inflation adjusted returns being the figure used for calculating tax I thought I'd mention that here in Australia up until around 5 years ago that is exactly how the tax was calculated.
What they would do is look at the initial cost of the shares multiply the cost by the calculated CPI then add the brokerage. That was then subtracted from the sale price less brokerage.
It was changed in favour of a method where you pay tax on 50% of the gain if you hold the stock longer than 1 year (Mentioned that before).
I'm not sure why they changed and which way works out the best in regards reduction of tax.
I would imagine as the governments are manipulators of public behaviour they may have been trying to encourage share ownership by easing up on the tax burden, but at the same time trying to discourage short term traders.
My accountant had me dowm as a short term trader from a tax point of view and the tax office don't like that at all.
Regards
Neil
Minimum buy amount.
A few posts mentioned about the problems with the minimum buy of 5% on a $10,000 account being too small at only $500.
As I am using Automatic Investor it does let me use a % amount for the sell side and a fixed value (I use $800) for the buy side.
THis flexibility is very useful and shows why it is sometimes better to buy some software than to try and calculate things with a spreadsheet.
As still a relative newcomer to AIM and finding that most people are AIMing ETF's which aren't available here. Did people have a problem with individual stocks.
I know about the deep diving pain from MRL.AX which would have looked a heap better if it had been LD-AIMed rather than regular AIMed.
I'm wondering if the risk can be lessened by LD-AIMing 20+ highly volatile stocks with a max risk of 2.5k per stock and then using the investment pyramid methodology of then moving profits from them into regular AIM in dividend paying blue chips.
I must admit I almost like looking for the most horrendous looking stock charts of small 20c mining stocks that move up to a $1 then down to 10c and back to 50c all because I know I have defined my risk beforehand.
I set very wide bands for SAFE of 20% on both sides as those are realistic for stocks that move 100% in the course of year.
What we have is a great opportunity to be a volatility harvester taking high risk stocks and lessening the risk by diversification and LD-AIM.
Cheers
Neil
Aussie Market (ASX) hits new high.
End of the week over here saw the S&P200 breach the 4300 level for the first time ever.
I'm beginning to get feelings of irrational exhuberence again.
Had a customer that came into the shop on Friday and purchased some SAI Global (SAI.AX) for a gain LIFO gain of 114%, now those are the sort of gains I like.
On the topic (can't remember who started it) of Survivor Bias which is something we should all become aware of. It is best illustrated by this list of DOW stocks from 1905 (100 years ago)
Amalgamated Copper
American Car & Foundry
American Smelting & Refining
American Sugar
Colorado Fuel & Iron
National Lead
People's Gas
Tennessee Coal & Iron
U.S. Rubber
U.S. Rubber first preferred (replaces U.S. Leather preferred)
U.S. Steel
U.S. Steel preferred
Now, these companies probably don't make up the DOW constituents today, the question is what happened to them?
We all are familiar with the graphs of the indexes rising inexorably over the century underlining the fact that we should be invested to make money.
If stocks are moved in and out of the index over the years to reflect current technologies or trends then one would expect the index to forever rise.
What would have happened to the DOW if the 1900 constituents remained the same, where would it have gone.
I read one very interesting website that said that the rise in value of the markets is merely a reflection of the loss of value of the dollar (how much did a postage stamp cost 10 years ago to the current price).
When the DOW is normalised to remove the effect of the loss in dollar it has essentialy been flat for more than 50 years.
Currency left in the hands of irresponsible people will cause asset prices to rise but with no 'real'rise.
I guess this is what Mr Core has been talking about for many years now when talking about gold v currency.
Luckily gold can't be printed and is finite, like most of earths resources.
Lets just hope we don't trash the planet for an illusion of gain.
Sorry for rambling.
Cheers
Neil
ETF sometimes don't come back!
Hi Aim, I think the best way is the LD-AIM way where you first allocate the max amount you want to risk.
I have been using $2500 and that allows me about 3 buys of $800 +brokeage.
If the company goes bust, so be it, my risk level has not been breached.
As I only initially buy $800 worth of stock I am going to take the attitude of, I'll treat it as a momentum trade and say, sell if it doubles in value, if it falls then I'll average in.
By buying many stocks using small amounts, it lessens risk because of diversity.
I remember Banker Trust launched a technology fund over here, guess what date they launched it, ok I think you have guessed, March 2000.
That fund went from $1 launch price to 20c when I think it was delisted (acually it wasn't an ETF it was an unlisted fund) or merged into one of their other funds.
Some might say conveniently hiding the evidence
Cheers
Neil
AIM V Momentum
Hello Adam,
I spent many years as a momentum trader and made plenty of money in the late 90's but, like many others, confused luck with skill. It was hard not to make money during those times.
The good thing about AIM is that you can still be a momentum follower, the only difference being that you sell out gradually on the way up rather than try to work out where the top is and sell in one go, only to find that you were too early and the stock doubles again.
AIM is a great too for reducing stress. In fact I'm just about to close down my options trading as I have found that the reward for all the stress it induces is just not worth it. AIM give's me a good night sleep.
I have many acquaintances who tell me I should trade forex because of the huge liquidity and 24 hour trading. I can't think of anything I would rather not do.
Most of these people stay glued to the screen until the early hours of the morning (no action during Australian day) and end up tired, frustrated and poor.
Cheers
Neil
Hi Toofuzzy
*AIM REACTS to the market instead of trying to predict it. It takes advantage of the opportunities presented instead of trying to determine in advance what MAY happen.
And that is why I like it so much
)))
Neil
Do we really know what is going on?
I am always amazed at the ignorance of my fellow work collegues when it comes to the area of financial markets.
It seems to me almost to be wilful ignorance and something I could not understand but now it is a bit clearer.
I think it is a case of people never want to appear to not understand something so instead of saying they don't understand but would like to they say they don't care and are not interested.
Even myself with an amount of knowledge of the financial markets must first admit there is much out there that I don't understand and then make an effort to understand it.
I just happened to be reading my usual gold website when I came across a link to a website with an interesting article about the pillars of the financial markets crumbling so I thought I'd put the link up as I have heard little of no discussion on this subject in any of the financial press.
http://www.financialsense.com/fsu/editorials/kirby/2005/0518.html
Have a good holiday folks
start buying those bars of soap
Neil
Hello Ray
Bollinger Bands are good indicators of Volatility also. If you use a longish average just check out how wide the bands get.
I have an indicator set up on Metastock that plots the width of the bands so I can see how often they widen and narrow.
Regards
neil
Yet Another LD-AIM Question.
With my program that I'm setting up and testing I'm looking at preservation of capital as a priority, with that in mind this is what I'm currently doing (or thinking of).
Buy $800 of stock.
Now one of 2 things can happen over time the stock can rise or fall.
If it falls I will then make several more purchases of $800 until reach a limit of $3200 say then sell off when required.
If the stock instead rises AIM would give a sell signal for your initial parcel of stock, so the question is, do you take the sell signal or do you just ride the wave higher and use a trendline as a lower exit and keep putting off the sell until the next higher level to squeeze as much out as possible.
I feel this is a better option than say buying and initial $2400 of stock and assuming the stock will rise and you will get several sell points as if it falls you have the loss on your initial quantity as well as the cost of subsequent purchases.
I'll be interesteed in others views.
Regards
neil
Beta values
I think Tom mentions this in his list of criteria to look for when selecting a stock, somewhere on his website.
I believe all the beta value is is a measure of how the individual stock responds to the market as a whole. If the stock has a beta of 1 it could be an index tracker or some other stock that follows the index faithfully.
When you get above that, towards 2 it would be far more volatile than the market, stocks with beta lower than 1 would be less volatile than the market, theoretically less risky but also less of a return would be expected also.
Don't forget of course that the Beta is all historical and that the old disclaimer of future volatility may not be the same as past would apply.
I'm sure I have picked up stocks with a Beta of 0.82 that have been pretty wild in comparison to the market.
Regard
Neil
Hello Adam
Have you got the latest version of the Java runtime files?
You can find them by following the link below:
http://www.java.com/en/download/manual.jsp
As I remember it is a fairly large file so a fast connection would be an advantage.
That should help you.
Regards
Neil
Hi Toofuzzy
I have been testing to find suitable parameters for LD-AIM.
so far what I have settled on (open to change)is this.
Using the free spreadsheet:
Initial investment $10,000
Cash Percentage 40%
Min Buy/Sell $800
buy/sell SAFE 20%/20%
I realise that sounds like wide bands buy most stocks over in Australia are low priced ie 10c upto $5. The larger companies trade at higher prices but not would be above $50.
I have been trying to select stocks that are in the range of below $5 with the rationale that it is easier for a low price stock to double in price rather than a high priced one, don't ask me why this is.
With these settings it will not trade much on a single stock, but if you have 10 in a portfolio you would get trades at least once a month.
A case in point: JST.AX floated a year ago at $2.10, it went up to $3.10 at that point some were sold, just today it had a profit warning issued and the stock is at $1.80.
As you can see a fair bit of volatility.
Now if I had my SAFE settings at say 10% (LD-AIM only) I would be probably be running out of cash.
Maybe I have tried to mininise risk too much as I have been budgeting upon 3 buy points, initial buy then 2 more, again maybe too conservative.
I'd like to get a lot of bang in each trade, trade each stock infrequently but have a large portfolio.
One other reason for this is from the tax perspective.
If you hold a stock for less than a year you will be taxed on 100% of the capital gain, over a year and you get taxed at 50% ie if you make $1000 gain in under a year tax would be $300, hold for over a year and it is $150.
Regards
neil