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sorry, didn't mean to reply. Meant to make a new post.
Hi AIMster,
1) I'll have to give adding the number of shares to trade to the Portfolio Manager some thought. For multi-equity portfolios, this won't work and so won't be consistent. On the other hand, you can always double-click on the portfolio in the portfolio manager list and view the number of shares to trade on the main window (I know, it's an extra double-click). I'd like to keep it consistent so I'm leaning towards not doing that (but I'll do some thinking on it).
2) There's a suggestion to sort the Portfolio Manager list already on the AI enhancements list. When that's implemented you will be able to click on the "RECOMMENDATION" heading and sort by buy/sell/hold (which will effectively group all the buys, sells and holds together).
Thanks for all the suggestions. Please keep them coming.
Hello Jimbo,
Optimization is a very difficult thing to do. The problem is that it is too easy to curve fit data to past performance and see great results. However the probability that stocks and markets will behave exactly as they have in the past is very small.
To get around this, a number of methods were created, some very good and others useless. One of the methods I like is called walk forward testing (just Google "walk forward testing" or "walk forward analysis" and you should get lots of results). While it doesn't guarantee that models created using this method will work 100%, it does eliminate many of the problems associated with how most people approach optimization.
Also, the more variables you use, the greater your chance of error. So, in general, it's best to select a few variables that have the greatest impact on how the system performs (in AIM's case Buy and Sell Resistance are two of the main ones) and optimize, using walk forward testing, on these.
I hope that helps.
Hi AIMster,
That beep is actually a system beep that is automatically played when a warning window pops up. So I can't have AI disable it without affecting the rest of the system.
However I do have an item on my list to give the option of not having the windows come up when doing a multiple portfolio update. The new recommendations can then be viewed from the Portfolio Manager window. So hopefully that will allow you to get around the annoying beeps.
New Pragmatic Investor paperback book now available at Amazon.com
It's available at Amazon.com here --> http://www.amazon.com/exec/obidos/ASIN/B002ACXX64/automaticinvesto
New Pragmatic Investor paperback book now available at Amazon.com
I wrote a book. It's a good book. It's available at Amazon.com here --> http://www.amazon.com/exec/obidos/ASIN/B002ACXX64/automaticinvesto
If you get the urge, grab a copy for yourself and your family.
Thanks,
Mark.
Hi Jimbo,
Split Safe is the idea of separating the buy and sell percentage into individual variables. Lichello had one SAFE variable (which he set to 10%) that he used for both Buys and Sells.
Tom Veale came up with the idea of using one variable for Buys and another for Sales. As such, it doesn't make sense to speak of an AI model that duplicates split safe. You can set the buy and sell safe to the specific values you want and then save the model. Then, when you subsequently use that model, your saved split safe settings will be used.
The same things applies to Vealies. You can set the Vealie parameter in the model, save the model and then when you use that model in future portfolios, your customized Vealie setting will be used.
See http://www.aim-users.com/aimchng.htm for more information on split safe and Vealies.
I hope that helps.
Hi Steve,
I've watched a few presentations now and, for the most part, things that were said 8 years ago are directly applicable right now. Timeless wisdom.
I like Vegas too. And 10th anniversary sounds like a plan -- 2010 could also be the 10th anniversay (as I believe you guys went down in 2000 too).
P.S. I still have the shirt.
Hi AIMster,
Yes, this is on the list. I'll add it to the next SP update.
AIM Conference 2001...
I recently decided to convert some old VHS tapes to a digital format before my tapes (some nearly 20 years old) disintegrated.
And lo and behold if I should not come across a copy of the AIM 2001 conference. So far I've converted presentations by Tom Veale, Bernie Goldberg and me. I've got half of Barry Savage's presentation converted and I plan to do all of the presentations that I find on the VHS tape.
So if you're interested, visit http://www.automaticinvestor.com/videos for a look (currently I've only uploaded a trailer but will upload all of the actual presentations in the coming weeks).
AIM Conference 2001...
I recently decided to convert some old VHS tapes to a digital format before my tapes (some nearly 20 years old) disintegrated.
And lo and behold if I should not come across a copy of the AIM 2001 conference. So far I've converted presentations by Tom Veale, Bernie Goldberg and me. I've got half of Barry Savage's presentation converted and I plan to do all of the presentations that I find on the VHS tape.
So if you're interested, visit http://www.automaticinvestor.com/videos for a look (currently I've only uploaded a trailer but will upload all of the actual presentations in the coming weeks).
For those who purchased "the Pragmatic Investor" digital book, I've set up an affiliate program (that's a program where you refer people to the PI book and if they purchase, you earn about $35 for each sale).
For details on the ebook visit --> http://www.pragmaticinvestor.com/pibook
If you're interested in participating in the affiliate program, visit --> http://www.clickbank.com/promote_products.html (or just send me an email and I can get you started).
For those who purchased "the Pragmatic Investor" digital book with Automatic Investor, I've set up an affiliate program (that's a program where you refer people to the PI book and if they purchase, you earn about $35 for each sale).
For details on the ebook visit --> http://www.pragmaticinvestor.com/pibook
If you're interested in participating in the affiliate program, visit --> http://www.clickbank.com/promote_products.html (or just send me an email and I can get you started).
OT: for those who purchased "the Pragmatic Investor" digital book with Automatic Investor, I've set up an affiliate program (that's a program where you refer people to the PI book and if they purchase, you earn about $35 for each sale).
For details on the ebook visit --> http://www.pragmaticinvestor.com/pibook
If you're interested in participating in the affiliate program, visit --> http://www.clickbank.com/promote_products.html (or just send me an email and I can get you started).
Hi AIMster,
I had given this some thought and weighed the pros and cons, but at the end of the day, AI has been selling at the current price for 6 1/2 years, so I decided it was time for an increase.
To determine the price, I did a survey of other investment programs out there and realized that most with comparable (or less) functionality/complexity were at least double AI's current price (even the PCA software is about $100 more).
So although the price increase appears steep, I think that's mainly because the software has been selling relatively inexpensively for such a long time. Compared to others out there, the new price is still comparatively cheap.
The other reason for the price increase is that I'm planning to build a single framework for all 3 of my current products, AI included, so that they can be easily moved to the cloud computing model (Microsoft has a beta cloud platform called Azure, which I'm currently evaluating, and Amazon has had one for some time now).
Of course doing this requires new investment in development software and computers as well as ongoing cloud computing expenses, so this is one way to defray those costs.
Personally I believe AI for $297 is a good value. If others don't, that's okay, I know there are many other AIM tools that are free or nearly free that they can use.
As always, I appreciate your comments and insights. There are a handful of AIMers out there that always give me good feedback and you are certainly one of them.
Automatic Investor's price will be increasing by $100 U.S. on Feb. 15th, 2009.
If you read this board, I just wanted to give you some advance notice on the price increase so you can tell your friends who might be interested in AI. Until Feb. 15th, AI can still be purchased at the current price.
OT: Just wanted to draw your attention to this site where I (and 5 others) will be going for a Guinness World Record and raising funds for the Canadian Cancer Society.
If you're interested, have a look here --> http://www.BoardGameWorldRecord.com
Hi JC,
I see AIMster has already answered your question.
For a good list of some AIM software tools others might be using, go here --> http://aim-users.com/aimware.htm
Hi TF,
No, I meant it the way I wrote it. I re-read my post and see that there might have been some confusion in that I wrote the two sentences as if they are independent of one another. I should have said given (1) and (2)...
If we're not using something like the vWave to set the starting cash reserve, it's better to ignore volatility with respect to cash reserve.
Hi Clive,
"I meant that it's the compound average rate that is the investment gain we can actually spend. The simple average is just a figure."
From your post I did understand that the Gummy calculator took simple average and SD into account but wasn't clear on whether its results were nominal or real returns (although I haven't looked at the web pages yet so I assume it would be explained there).
Thanks for the clarification. Yes, I agree. As you say, the compound rate is the true value while the simple average is not.
Hi Clive,
Yes, the large-cap figures in the article are total returns and are based (if I recall correctly) on the S&P 500 rather than the Dow. When I wrote the article we were in the midst of a bull market which started circa 1994.
The S&P 500's P/E, until that time, was close to the historical average P/E (after 1994, the P/E went up significantly). So from a historical perspective, ending in 1994 seemed to provide a good approximation of the true returns/risks. Note that adding the years 1995 through 2000 (the article was written in 2001) to the analysis (i.e. [1926 to 2000]), skewed the returns upwards by over 1% per year for the ENTIRE period.
Given the freefall in markets over the past year, I'm not sure what the results from 1926 to 2008 would be, but I'm sure it would be more in line with the true values than it was back in the late 90s -- as your analysis of the Dow from 1928 to 2008 appears to show.
A simple subtraction showed that real returns were about 6% (assuming a historical 4% inflation rate) which is different from the Gummy calculator results (however without having yet looked at the calculator, my guess is that the calculator's results are more accurate since I just used simple averages).
Thanks for the calculator links, I'll have to play around with them.
Hello JP,
Selecting a model (i.e. configuration options) with which to start depends primarily on two things: (1) Where we are in the investment cycle, and (2) the volatility of your chosen equity.
For (1) I would recommend using the vWave (see the main AIM board for current values) to determine the approximate starting cash reserve, and then use a model that is close to that.
For (2), the more volatile the stock, the less cash you can start with, in general.
Putting them together, start with the vWave's cash reserve recommendation and then add a bit to it if your stock is less volatile.
As you're just starting out, I would recommend that you turn off all of the filters. The filters can actually increase returns over long time periods by removing inefficient trades. However they don't work well for all equities and it's best to get a feel for the AIM algorithm before you start adding complexity.
As for using Bond ETFs, you can if the ETF has enough volatility. However you should view this as an equity rather than it being some sort of asset allocation mechanism.
AI allows you to do asset allocation with its Asset Allocator function. This is where you would concentrate on allocation. If you did indeed AIM a bond ETF, it would form part of the overall asset allocation, along with your other AI portfolios.
The actual Bond ETF within an AI portfolio is not, in itself, considered an allocation (although AIM, by its nature, does allocate between cash and equity). There's an article I wrote some time ago that explains AIM allocation (both at a micro-level and macro-level). You can read it here --> http://www.automaticinvestor.com/articles/mpt.html
Hello Jam,
(1) The recommended way to reinvest dividends is to use the "Add Interest or Dividends" function on the "Cash Reserve" menu.
This will simply add the dividends to the cash reserve for use in subsequent buy recommendations.
(2) Another way to add dividends is to use the "Deposit Cash" function on the "Cash Reserve" menu. This could cause a recommendation to purchase some shares (depending on your configuation settings) with the remainder added to the cash reserve.
The first method is more "Lichello-like" because he ignored dividends. The second method treats dividends as a cash infusion -- which in practice is really what it is.
(3) There is also another line of thinking that says you should use the entire dividend amount to purchase shares. This follows the reasoning that the stock price theoretically falls by the amount of the dividend, so putting the dividend back into shares cancels the dividend transaction.
None of these methods is incorrect, so use the one you like the best.
My recommendation is to use method (1) if the dividend is relatively small compared to your transaction fees. Use methods (2) or (3) if the dividend is relatively large.
Hello JP,
I have received your emails and sent you 4 different replies (Nov. 22, Dec. 2, Dec. 4 and Dec 10).
Perhaps my replies are going into your SPAM folder. Please check there and let me know if you still don't see my email replies.
I started a blog a few months ago here --> http://aptusblog.wordpress.com for anyone who might be interested.
Hello JP,
You can use the portfolio manager to view summaries, charts and reports of ALL portfolios. Although you can see the 5 funds in the summaries, reports and charts, you can't currently isolate them (you'll see all the other portfolios too).
There has been a long-standing item on AI's enhancements list to add functionality that supports multiple users (although I've since re-thought the naming and will change it from "users" to "accounts").
When that is added you will be able to create portfolios under different account names (e.g. IRA1 and IRA2). This will allow you to do exactly what you describe.
However there is no scheduled date on when this functionality will be available.
Hi JP,
As AIMster mentioned, using a broadly diversified fund such as SPY will lessen the volatility and therefore you will most likely trade less.
Having said that, in today's environment, the S&P 500 is fairly volatile. But keep in mind that usually AIM likes lots of volatility and therefore the ideal way to use it is to use funds that contain components that are highly correlated within one AI portfolio.
To get the diversification you need, you would select additional funds (that also contain highly correlated components) that have low correlations to the other funds you've chosen.
So if you decide to diversify over 5 funds, you should choose each fund so that all 5 have relatively low correlations between them but that each of the 5 is comprised of components that are highly correlated.
A good way to start using SPY in today's market is to check the level of the vWave and use it as your starting cash reserve. Then select one of the models in AI that has a starting cash reserve that most closely agrees with the vWave.
Or you could simply create your own model based on the vWave starting cash position.
Regarding filters, other than the user's guide, there have been discussions over at the main AIM board here at iHub. You can search the board for "filter" (but you have to be a premium member to do it -- although you can take a free 2 week trial).
Hello Jers,
Lichello stated that he liked to keep his cash reserves separate for separate AIM programs because he didn't like one taking cash from another.
Since he started all of his programs with a fixed percentage (e.g. 50/50), he would simply divide his cash into, say, 6 equal portions and be on his way.
However with AI you can actually have different AI portfolios (which are equivalent to Lichello's AIM programs) using different parameters (so one could be 50/50, another 67/33, another 80/20 and even a customized one, such as 100/0).
If that's the case, I would suggest that you split your total cash reserve into 6, weighted by the cash parameters you're using.
For example, if you have 2 portfolios, with a total value of $200, and one is 50/50 while the other is 80/20, then you would allocate $100 to each portfolio -- assuming you're diversifying equally over your funds.
Portfolio 1 would contain $50 equity and $50 cash. Portfolio 2 would contain $80 equity and $20 cash. You can expand this for your 6 funds.
If you use the same parameter settings for all your funds, then just divide the total cash reserve equally.
I hope that helps.
I agree with you on that point, but there are problems with the non-internet type of license model (which prompted the change to begin with).
I'll think about how to get around it and see if I can come up with something.
Hi Glenn,
Is this still happening? I checked and everything seems to be correct on this end. However between 8pm and 8:35pm, I received some emails saying this was a problem.
Please let me know.
Tim,
First off, I'm not spinning anything. Just stating some facts.
Garzarelli's idea was one component of the i-wave, not the entire idea simply renamed "i-wave" with a graphic added. There are 3 other components (plus weightings) that ONLY when taken together, constitute the i-wave.
When I say that, "Tom created the i-wave himself," I mean that he was the first person, to my knowledge, that found the correct mix of components and put them together to form something new.
When the microprocessor was invented, it was created from components and ideas that already existed and were re-packaged into something new. Just because it was built on existing components and ideas doesn't mean it wasn't new -- and it changed the world like very little before it.
There's practically nothing created today that is truly revolutionary and doesn't owe its invention to something that came before.
The same thing applies to the i-wave.
Contrary to your statement, Garzarelli didn't create the i-wave or anything like it. She talked about interest rates and P/E ratios.
When Tom put her idea together with other ideas, that's when synergy kicked in and the i-wave became something of value in determining how to allocate between cash and stocks.
not sure what happened here but duplicate postings seem to have occurred. Removing the 2nd one.
Link to Tom describing the i-wave and where it comes from...
http://www.automaticinvestor.com/articles/TVIW.html
Hi Tim,
Very disappointing...
I'm not sure why you think it's disappointing. In the first case, I think it's great that an investment firm would use AIM to manage its clients' money.
That can only be good for AIM and give more exposure to the method.
In the second case, Tom created the i-wave himself and for many years gave it to us for free. However that doesn't mean he shouldn't be able to profit from it as he sees fit.
I think we tend to think that things on the internet should be free. To some extent that's true, especially with the open-source type projects, but if someone creates something of value and wants to be paid for it, that's great too.
People will benefit from what's created and the creator will have an incentive to do more creating.
Thanks Don, I got them.
I'm going to have to dig out Don Carlson's spreadsheets, but I think he has been quite successful using the ladder technique with real money (albeit with some additional variables that he can tweak).
I'd be interested in seeing some historical testing results with actual stock prices if anyone has some.
Very interesting refinement of the ladder idea. Have you run any backtests to see how it would have performed relative to AIM (i.e. both using the same stock(s))?
"equally however a spread of 7 individual stocks is relatively well protected from the likelihood of total failure of all seven holdings."
7 individual stocks should help you overcome specific company failures, but would not give a true diversification benefit (like many index funds would) unless the stocks had low correlations between them.
In that happy case you are actually getting a huge diversification benefit. 20 low/no correlation stocks will give almost 100% of the protection of a 500 or more stock portfolio. 7 will give 70% or so protection. But it would be relatively easy to use 20 stocks in your laddering strategy by creating 20 ladders -- since they don't require as much initial investment as AIM.
I like the simplicity and the fact you have no variables with which to tinker.
Hi AIMster,
I just re-read your post and your explanation was clear enough. I obviously didn't read it closely enough the first time through. I do that sometimes
Hi Glenn,
"I suppose it would make the percent returns that are presented in AI a bit more accurate though."
The returns calculated in AI are not based on the average stock price. So adding additional ways to view average cost will not affect the returns displayed in AI.
These returns are as accurate as they can be given the current portfolio value, the original investment and the elapsed time.