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Hi Ocroft,
Can you also explain how you handle the sell?
The precise mechanics is not clear to me from LostCowboy's example.
Kind Regards, K
Hi Ocroft,
We already have the method to postpone buying by waiting a month between two real buys.
This method looks good as well, I checked it in a few cases in the 2008/2009 down market.
I imagine when not using AIM BtB, but AIM with limit orders, it could go like this: have a virtual limit buy order, start the clock for one month. If another virtual buy order happens, restart the clock for one month. If the month expires, sum all virtual bought shares and buy them at the market price.
In several of my machines it would have been an improvement.
Another advantage is that one can use limit buy orders with confidence, virtually buy to the ultimate bottom, and then do the real buy. I would guess that the buy will be well before the first sell order, taken from the ultimate bottom that the market reached. The deep buying is always the most difficult, and this technique could make it easier.
Thanks for sharing this. It is amazing that we can view and use AIM BtB and AIM with limit orders, in new ways again!
Kind regards, K
Hey Clive,
Nice spreadsheets!
Would it be possible to show the rebalance amounts as well, that would make them more self explanatory. I could figure out spreadsheet one, but gave up at number two. :)
Spreadsheet two is interesting because it shows PP behaviour with AIM timing, where PP-timing is 15%/35%.
The second spreadsheet could be improved by comparing the entangled four-way versus four-way-AIM against the same assets. It would be interesting to see if four-way-AIM would give the same no-decline growth for the total portfolio.
Kind Regards,K
VB and VBR
Bought them early February and had my first sell today. Buying and selling occurred at the same point in time, so VB and VBR moved similarly.
I like the way they move, they could be good AIM candidates.
Kind Regards, K
How much one would want to buy at that action-point is a different matter!
Yesterday i saw Mr Buffett on TV. He said he bought too much in Oct, Nov 2008 and not enough in March 2009.
He had cash available but kept cash for even greater down drafts. So the 'how much' is also a problem for Mr Buffett.
I believe AIMers had the same experience as Mr Buffett, with the difference that they always know 'how much'!
An interesting idea was that he said his company always has enough cash for an emergency, for example when the stock exchange shuts down, that happened in 1914. So he covers all risks.
Kind Regards, K
Hi Adam,
Deep divers are not a feature of the system, but a choice that an AIM user can make. The choice of only AIMing one stock.
AIM buying should be an opportunity to Buy great value in a disciplined way.
Another way of handling deep divers, is at each buy signal to buy something you don't yet own. Lichello did that for tax reasons he wrote in his book.
You need a plan to decide what you want to buy otherwise you get buying 'panic'. To buy a stock in free fall is risky and not necessary when you use AIM.
At the end of the buying period you can reorganize, although my preference is to reorganize thought AIM sells. Only use AIM buy and sell signals!
You can rotate, but it is nice to have a (virtual?) AIM machine running the target and the target should have an AIM buy signal.
Rotation is nice at the top of a cycle.
To avoid an ENRON, look at the cash situation of the stock you buy.
And, to have one deep diver is a good experience and one should have one soon, so one learns to avoid them.
I hope this market will deep dive soon!
Happy diving, K
Heya Grabber,
I have Spring Holiday, so some time to read up a bit :)
It should be Blend and Value, so the Growth part is small.
You have the 3F model of Fama and French, 1- being in the market, 2- Have more Value and 3- Have more small cap.
Small Cap Value is the holy grail.
This is from the IFA.com website:
plus another one form the same website:
Kind Regards, K
Portfolio setup
Looking at a portfolio setup in the spirit of Merriman/Index Fund Advisors. This is not what I have, but it is my current buy target if we get a buying opportunity this year. Abbreviations: Large Cap Blend, Large Cap Value, Small Cap, International, Emerging Markets.
Type ETF Allocation %
US-LCB VTI 9
US-LCV VTV 9
US-SCB VB 10
US-SCV VBR 10
Int-LCB GWL 9
Int-LCV EFV 9
Int-SCB SCZ 10
Int-SCV DLS 10
EM-LCB VWO 4
EM-LCV DEM 4
EM-SCB EWX 5
EM-SCV DGS 5
US-Reit VNQ 2
Europe-Reit IPRP 2
Asia-Reit IFAS 2
Hi Toofuzzy,
I suppose you can own STOCK, BONDS, GOLD, CASH with 25 % in each and either rebalance once / year or if one asset gets to be 15 % or 35%.
Yes and rebalance at 15% and 35%.
But let's say that gold is at 27% and cash at 21% and you get an AIM sell for gold, you can execute the AIM sell. AIM is happy and PP is happy, you have a bit less Gold and more cash. I think that Harry Browne said that you can rebalance at any level, but that 15% and 35% is mandatory.
So you let AIM do the rebalancing between the 15% and 35% and do mandatory PP rebalancing at 15% and 35% with PC change.
Kind Regards, K
AIMing inside PP
My PP is four ETF's and is managed by keeping them at 25% with a bandwidth of 15% and 35%.
Also each individual ETF is in an AIM spreadsheet to see what is happening AIM-wise.
While updating this weekend, I see that one can AIM-trade within the 15%/35% bands. I have more than a 10% sell in PHAU, european based gold.
The 15%/35% bands would then be used for resizing of the AIM machines with Portfolio Control realignments.
Kind Regards, K
Hi AIMster,
That certainly is a nice way of diversifying over the countries.
You get a few more machines to handle that way :)
For now I stick to the UB&H portfolio. The same strategy is also described in William Bernstein's Four Pillars, which is based on Fama research with the value tilt.
Speaking about value, this morning had a sale in IASP, the ishares Asia Pacific property fund. Use similar settings as Tom is using in his retirement portfolio, 10% min txn and buy safe, 0% sell safe.
Kind Regards, K
Hey Jack,
Japan needs to go up a bit more for my first sell :)
It could be the weakness of the euro that causes this.
There was a news item about big money being transferred from Greece to Switzerland. Do not know where the Swiss invest this money, maybe the USD or something else.
It is difficult to see what is real and what isn't real in this market. One thing that is clear in this 'crisis', is that there is not something like Europe. It is a set of nations, each nation with its own agenda. Everything can happen. It seems that AIM is the right technology for such an environment, where the market behavior is unpredictable. How else to stay in the market?
Kind Regards, K
January 2010
From first Saturday in January till first Saturday in February: +2.73%.
This was calculated in euro's, and was mainly driven by the rise of the US$.
Now looking at a Euro vs Dollar Machine to get the Euro-Dollar ratio right.
The new stuff, bought this month, was down 2-6%. Bright spot is Japan which could be trending higher. Another interesting move this week in IBGL, flight into the US$ and also flight into long term Euro Gov Bond.
Kind Regards, K
Hi Tom,
It is understandable that they have to close a few ETF's that are not economical to run. Although I think a discussion about it could be more public.
Someone from Wisdomtree or liaised with WT, and suggested to be a spokesperson for Siegel, came up a few months ago with a portfolio that had many of the closed funds in it. In hindsight this was a salescall, although at the time I didn't interpret it like a sales call, but honest advice. My bad.
Not sure who talked about investors and their investment funds and salespersons with their investment funds. It feels like WT is salespeople with investment funds. I could be overreacting or too emotional about this, but this type of thing has happened to me before. I did run then and did now as well.
Kind Regard, K
Hi Tom,
Yes, this does make a mess.
I left it all behind me now and restructured everything.
Hope that the market will make a huge drop now :)
Kind Regards, K
Hi All,
The plan is to increase cash levels dramatically for 2 reasons, the uneasy feeling with the current state of the market and a personal reason for which cash is needed.
Restructure according to the Merriman plan, using Permanent Portfolio (in PP-original form or AIMed) for one part and the rest AIMed.
Was thinking about these ETFs while not using International Small Cap Blend and International Small Cap Value although VSS is a candidate:
VWO emerging market
VNQ US Reit
IASP Asia Reit
IPRP Europe Reit
VTI Large Blend(TSM) and PP
GLD PP
TLT PP
SHY PP and AIM's US cash
VBR US small cap value
VB US small cap
VTV US large cap value
IMEU Europe Large cap blend
IJPN Japan Large cap blend
IAPD Asia Value
IDVY Europe Value
Hi All,
Lately the urge to go into cash is getting stronger for me.
Especially when something like this is published:
My AIM machines are producing cash but are not yet at the cash levels we had before the crash. The total value of the machines is equal or better to pre-crash levels.
My thoughts are to sell some, to get the cash levels up again at good levels, and play it very conservatively from there. In terms of gold we had an OUT signal long ago.
Another consideration is the interest rate level. If interest rates go up, equity prices could drop and the rescue effort of last year could be annihilated. If interest rates don't rise we have some scope for improvement, but how much?
Maybe others feel the same fear ?
Kind Regards,K
Hi All,
Reconsidering other Wisdomtree funds as well.
Rotated DEM into VWO. VWO only pays dividend once a year but its expense ratio is 0.27% in stead of 0.63% for DEM.
Sold a few EXT as well, which is added to AIM cash.
Under consideration:
For DLN a replacement could be VTV.
For DON it could be VOE.
For DES it could be VBR.
For DHS it could be VYM.
For DTH it could be EFV or could add to AIM cash.
I am a bit upset, because a few of the funds that are closed are part of a portfolio proposed by someone close to Siegel not long ago.
Kind Regards, K
Hi All,
Wisdomtree is closing 10 funds.
Some of my ETFs belong to this list of 10 funds.
These ETFs have been sold at market price, which was no problem because the buy date was February 2009.
The first thought was to buy something else.
However with a Vwave in or close to high risk level it seems better to add the cash to AIM's Cash, for me that would be SHV,SHY or BSV etc.
Still have to decide which one :)
Kind Regards, K
Hi Grabber,
So you can now participate in all US equities?
Using now Interactive Brokers IBKR. I can now trade worldwide in all kind of things. I try to use GTC sell orders. Several times now I had them executed far above the market price at the open or just a few seconds before the open. That really is the AIM sell feeling++.
At the moment i am playing mostly with ETFs and some value stocks. After your results of 2009 I have to reconsider or rethink a bit.
Kind Regards,K
Hi Grabber,
Congrats with your super results:)
I have access now to the US market which i didn't have in 2003! I use MT (arcelor mittal which is also volatile) within a multi-equity portfolio.
With these volatile stocks you often mention a stop-out.
If you use the V-wave and when the V-wave is in high risk territory and you have a crossing of the 200DA from above, while the 20DA and 60DA have the same direction(they are all aligned and breaking the 200DA), then you sell your machine and go into cash?
I hope you have an excellent 2010( i also had my first sell of 2010 in IDVY, an euro dividend ETF)
Kind Regards,K
Hi all,
Got this picture from
http://seekingalpha.com/article/181715-domestic-and-international-sector-volatility?source=feed
RiskGrades provides relative risk ratings for securities based on the volatility of the security relative to a basket of global equities.
The website http://www.riskgrades.com gives more information.
Using SPY and EFA, AIMers could add Materials, Energy, Financials, Industrials and Technology.
Kind Regards, K
Prelim Results.
A very good year to Tom and to all!
I am looking at calculating the results, but cannot do that because of additions and withdrawals.
I can say that from 01-01-09 account value was up 30+%.
From 01-03-09 account value was up 70+%.
(On 01-01-09 I still had money to invest while there was no cash left at 01-03-09)
I calculate in euro's and hope that the dollar will go up in 2010.
On the Value percentage and Growth percentage: by Value you mean the Wisdomtree funds and by growth PYH?
Kind Regards, K
Hi Alton,
No Health Care Funds. No sector funds at all.
Although VHT and DBR could be part of the domestic and foreign component. IXJ could combine VHT and DBR into one package with a 6 month dividend, where VHT is yearly and DBR quarterly. XLV is from the spiders family, which I do not know that well. Is there an advantage in using the spider set of ETFs?
In the 'commodities' allocation part, i can see that you can use MXI for example or a combination of VAW and DBN. XLB would be ok, if it has a better ER than VAW.
In the 'Reits' allocation you can use VNQ and DRW, although I like to slice it US/Euro/Asia(Ishares series).
Tom's portfolio looks like the IVY, although Tom is using Wisdomtree funds and PYH in stead of VTI.
All these portfolios seem to be based on research by Fama, who discovered that a Value tilt is good for performance.
Kind Regards,K
Mebane's IVY Portfolio:
VTI 10%
VB 10%
VEU 10%
VWO 10%
BND 10%
TIP 10%
VNQ 10%
RWX 10%
DBC 10%
GSG 10%
If you assign a weight to:
Equity : 1
Gold : 1
LT Bond : 1
Total Cash : 1
Then you can subdivide Total Cash for example:
Cash : 0.25
SHV : 0.25
SHY : 0.25
IEI : 0.25
Then for example for SHY you could have :
NoOfShares 120
Weighted CV 10000
BuySafe -4 -400
BuyMinTxn 5 500
SellSafe -4 -400
SellMinTxn 5 500
Buypoint 9900
Sellpoint 10100
BuyPoint/Share 82.50
SellPoint/Share 84.17
As an example for each asset class you get something like this which is easy to enter in a spreadsheet:
NoOfShares 800
CV 10000
BuySafe 5 500
BuyMinTxn 10 1000
SellSafe 5 500
SellMinTxn 10 1000
Buypoint 8500
Sellpoint 11500
BuyPoint/Share 10.63
SellPoint/Share 14.38
I checked it for PP in my spreadsheet: you get the same hold zones as with AIM, the only change is the 'moving' PC or CV.
I am not sure if a safe of 10% and minimal transaction size of 5%
is optimal. It could be that 5%,10% or 7.5%,7.5% is more attractive.
PC will grow yearly with 9% and it could be that you want to maximize the number of transactions.
For each asset class the hold zone has to be different, dependent on the volatility of that asset class.
A zigzag analysis is needed then on the major asset classes.
Kind Regards,K
The last formula was for a portfolio where each part has the same weight.
Assume N funds with SV1, SV2 ... SVN. (SV = stock value)
with weigths: W1, W2 ... WN
Then CV(j) = (W(j)* Sum(SV(j)))/ Sum(W(i))
Using similar mechanisms as in standard AIM: safe(0.1) and transaction value(0.05):
when a SV(j) > CV(j) + 0.15*CV(j) then sell 0.05*CV(j)
when a SV(j) < CV(j) - 0.15*CV(j) then buy 0.05*CV(j)
Kind Regards, K
Constant value..
Assume N funds with SV1, SV2 ... SVN. (SV = stock value)
Then CV = Sum(SV(i))/ N
Using similar mechanisms as in standard AIM: safe(0.1) and transaction value(0.05):
when a SV > CV + 0.15*CV then sell 0.05*CV
when a SV < CV - 0.15*CV then buy 0.05*CV
Lets assume that Cash (or ST bonds(SHY)) is part of this portfolio then the proceeds of any Sell can go into cash and every Buy is taken from cash. In this way Selling and Buying is not happening at the same time but asynchronously(while in PP we do it synchronously).
Re-balancing is automatic and part of the algorithm.
The above assumes that Cash is a certain SV.
You can also take Cash outside the portfolio and not use in the CV calculation, In that way Cash could become more dynamic.
Kind Regards,K
Macro timing methods..
I have been playing a very limited bit with Mebane type timing in some spreadsheets.
I was surprised about the Buy and Sell for a loss a little bit later. This happened frequently.
Mebane in his paper mentions that a few big moves negate the smaller loss-making moves.
So i think Meb200 selling is good after a big move up or at the end of an upmarket but i would avoid it at other times.
Kind Regards,K
Hi Ls,
Price cut's from above to below the moving average, all real becomes all virtual.
At that point in time you only have money and no shares. Then you will get your first buy and you update PC. You get more buys and your update your PC, until the official AIM Cash amount is exhausted.
Then you still have money to do buying, but should you update your PC? If you don't update from this point on, it is classic AIM and you continue buying until the MEB200 buy signal where you restore the AIM machine; updating PC from that point, probably would not work, unless you would have decreased PC at the MEB200 sell signal, basically decreasing the size of the machine at the sell signal.
Countering that however is the risk that the price may repeatedly zigzag between Mebane timing of being in and out.
If these zigzag's would happen then possibly you can catch them via the normal AIM algorithm, because you bought several packages on the way down. This would be classic AIM.
That monthly review falls in well with the 30 day AIM rule
The buying(and selling ) of packages on the way down, would be more than once a month, maybe weekly or daily. This will be possible because of the larger amount of Cash. It was shown that daily updating is better than monthly updating, only the fear of cash depletion stops people doing that.
In some cases potentially you might buy back real stock at a lower cost than the original average cost of purchase. That might be managed in one of two ways, either buy back the same amount of stock (but at a lower cost) or buy back more stock using the same cost of stock as that of the original average cost of stock. I suspect the former would be the easier of the two to manage.
When there is money left at the MEB200 buy point you can have several situations, you could even be selling stock via regular AIM sells. In general i think you would restore the machine to the point where all PC is accounted for, If there is extra cash available, then you could keep the cash, or buy the stock, but then you need to apdate PC for that amount, it is just a regular addition then.
If at the MEB200 point there is not enough cash left you can treat is as if you took cash from the machine and decrease PC.
You can also on the way down do more regular AIM buys if you intend to restore the machine by buying back the same number of shares. In that case the 'core' becomes smaller and smaller in size and you have extra cash to make more regular AIM buys. Even a decision could be made to buy back the core before the MEB200 buy point which would be more cost effective.
Kind Regards, K
Hi Ls7550,
I read the Mabane paper once, and i see he is rebalancing to 20%, although there is no good explanation on the precise methodology.
He also has loss trades(often shorter term moves) and profit trades(often longer term moves).
The way to combine AIM with Mebane seems:
- in the upwave sell to re-establish the cash
- when the sell signal is given sell the lot
- then execute AIM buys, having more money(100% cash) a deeper dive can be accomodated.
- when there is a buy signal, use all dollars in cash so 100% equity.
In this way we avoid downdrafts to a certain extent, (if we were in Iceland we better AIMed non correlated assets), in effect we amplify the buying.
You could use classic-AIM, define a core, and then you could sell and buy the core on the signals.
The system descibed above has a dynamic core. Maybe we need a new parameter to measure core size especially when we move money from the core into equity during the downwave.
I think there is more here :)
Kind Regards,K
Hi Ls7550,
Looking at the US PP and MEB, MEB's CAGR is 1.80 above the US PP.
Is the percentage also including the effect that when you sell and subsequently buy you get more shares?( Most of the time the buy price will be lower than the sell price).
Personally i would use Gold in stead of Commodities, the reason that a lot of the companies in VTI are well correlated with commodities and I remember that at the start of the crisis when AIG went under, there was a time that the future based vehicles couldn't be traded.( but with MEB you would be out)
So why not using a timing strategy with 20% VTI, 20% VEU, 20% IEF( or 12.5% BIV and 12.5% VGLT), 20% GLD, 20% VNQ in stead of using the PP?
Comparing MEB with AIM, you could say:
- that MEB is good in avoiding longer term downdrafts
- MEB is exploiting longer moves, where AIM would use Vealies.
- MEB captures less dividend but is in SHY for example while out.
- shorter term moves are better exploited by AIM than by MEB200.
Did you also run a test comparing MEB with standard AIM?
Kind Regards,K
Hi Tom,
Point well taken about the ponzi CEFs/ETFs!
Noticed that CHW also is doing this.
ACG with 1.00% ER seems indeed better and comparing it with lower ER ETFs from Vanguard, it wins on yield.
That seems to be a logical refinement!
Kind Regards,K
Hi Tom,
The new setup is really enjoyable to look at!
A few thoughts:
- (Current makeup - 36.9% Growth/Value Funds, 5.4% Precious Metals Fund, 13.0% Money Market Funds, 44.7% Income Funds). This view on the portfolio is PP-esque. The precious metals definitely made your portfolio more 'chaotic'. DEM also behaved nicely, while PYH lagged a bit, both compared to the Vanguard set.
- In general, it would appear that a dynamically managed version (AIMed version) of UBaHS will still do better than UBaHS all by itself.. I think that is to be expected. The figure they always show to prove the advantages of combining asset classes( 2 upwards sloping sinuses) in portfolio design, also shows that use of AIM on the seperate classes should help. I like the AIM model over rebalancing because of its rich functionality. Also I did a test a long time ago of AIM versus 'Graham style' rebalancing and I am happier with AIM.
- my 11th position, Cash. This is another nice AIM attribute: A dynamic counter-cyclic cash or ST bond position.
- not "steady state". This is good, because insights evolve, so the portfolio structure is a changing one. At this moment i have decided to not restructure or rotate my portfolio anymore, only rotate when AIM says Sell or Buy. I have the feeling that AIM signals are better and when i decide to rotate something feels wrong. I saw your return to ACG, i dont know if you did this because of the monthly dividends, and your move from NRO to VNQ. I considered to combine a few CEFs and ETFs, which i got during the last shopping spree, into ACG, because to handle one fund is nice and easy, but found out that the mix had a higher return than ACG so i left it there. I also got some NRO, but they are freeshares, which i will sell on an AIM sell signal. I also have IUSP, the ishares US reit fund. I used buy signals from this fund to buy into VNQ, now both IUSP and VNQ are selling(this morning i saw I had a VNQ sell yesterday!)
- DLS. I like the dividend capture of the Wisdomtree funds. When looking inside DLS I am not sure because of the concentration in a few countries. I have to buy more small cap blend and small cap value and still considering which vehicles to use.
- UBaHS is basically similar to William Bernstein's Four pillars of investing, I wonder what the source of these ideas is, could it be some economic research!?
Concluding: I also use as a first pillar the UBaHS or Bernstein framework. I use AIM buy and sell signals to gradually move into that direction, trying to exploit future ideas. As a second pillar I use a set of stocks selected using cash flow considerations, this set is AImed. As a third pillar i use inside the Bond component of the UBaHS, 2 PP's, I am looking at AIMing the US PP vs the EU PP. Still considering how to setup the mechanics(classic PP vs AIM PP, it looks as if AIM PP is better managable).
Kind Regards, K
Hi Neko,
Maybe this is interesting:
Paul B. Farrell's Lazy Portfolios, which also contains the UBaHp:
http://www.marketwatch.com/lazyportfolio
Also relevant for EoY rebalancers :
10 Important Things to Know About Portfolio Rebalancing
http://seekingalpha.com/article/178964-10-important-things-to-know-about-portfolio-rebalancing?source=feed
Kind Regards, K
Hello Tom,
Always nice to look at the graphs!
I was looking at the DBP graph and noticed that there were no sells.
I was wondering if this has any significance or that it is a case of 'still to be updated'?
Thanks and best wishes, K
PowerShares to Launch Convertible Bond ETF
http://seekingalpha.com/article/177080-powershares-to-launch-convertible-bond-etf?source=feed
Hi Info-overload.
At the beginning of this week i pulled the trigger and sold CLMS.
The average price was zero, so i was kind of 'relaxed' about CLMS.
The last few weeks it looked as if a top was formed and a few days ago in my spreadsheet i saw a crossover of the 12WEA from above through the 6MEA. You could also say it was in stage 2 and it looked as if it was entering or already it was in stage 3.
When it is back in stage 1 or the price is around $4 I will look at it again.
Because it was part of a multi equity machine I also needed a replacement. Lately I entered LLY and LMT on cash flow considerations. I had no new ideas this week so I rotated into JXI which is in stage 2 currently and i want to have the whole international Ishares series.(I am a gatherer)
Always I want to use AIM as the buy and sell manager using standard settings. I learnt that AIM is the best trader at home. However, adhering to the 'buy low sell high' philosophy, improved by the adage 'only quality please' I am considering every school of thought that gives a quantitative or qualitative signal.
Kind Regards, K