Hi AIMster,

Thanks for your condolences. Sorry I haven't been on much.

As far as passive income:

1. If you have an investment account (managed by my system, AIM, buy/hold, etc), then you can afford to take 4% out a year without worrying about it running out of money. In fact, at 4%, it should grow enough to keep up with inflation. If you are older, and don't mind exhausting the fund in, say, 20 years, you can take out a more aggressive % each year.

2. Trying to sell products over the internet, multi-level-marketing, etc. don't really work and are hard. There are so many people trying to get rich quick.

3. The best way to get passive income is to expand your definition of "passive" to include working from home. Then, you can get free-lance work like writing or programming or consulting/coaching.

Hi Crumbcatcher,

My system hasn't changed—I still use it and I'm still beating the market.

Since my system is working, I stopped tinkering with it, and have been concentrating on building my management consulting business.

Also, I've been dealing with a lot of personal tragedy. My brother, who was caring for my elderly parents, got cancer last spring and I had to step in to take care of all of them. My brother ended up dying in January, and then my father died a couple of weeks ago.

So losing 2 family members less than 2 months apart has been rough.

13 Year Return on my portfolio vs. Total Return on S&P 500 (including dividends)

In 2017, My "Stock Trading Riches" account beat the S&P 500 again (26% vs. 21.83%).

Here is the cumulative 13-year return:

(Source for S&P500 returns = http://www.spindices.com/idsenhancedfactsheet/file.pdf?calcFrequency=M&force_download=true&hostIdentifier=48190c8c-42c4-46af-8d1a-0cd5db894797&indexId=340 )

Year, Me, S&P 500

2005, 13%, 4.91%

2006, 14%, 15.79%

2007, 22%, 5.49%

2008, (40%), (37%)

2009, 44%, 26.46%

2010, 22%, 15.06%

2011, (5%), 2.11%

2012, 13.3%, 16%

2013, 23%, 32.39%

2014, 13%, 13.69%

2015, 1.49%, 1.38%

2016, 20.88%, 11.96%

2017, 26%, 21.83%

My portfolio had a cumulative 13 year return of +281% vs. +187% for the S&P 500.

That translates into a 13 year average annual return of 10.84% vs. 8.45%

12 Year Return on my portfolio vs. Total Return on S&P 500 (including dividends)

In 2016, My "Stock Trading Riches" account beat the S&P 500 again (20.88% vs. 11.96%).

Here is the cumulative 12-year return:

(Source for S&P500 returns = http://www.spindices.com/idsenhancedfactsheet/file.pdf?calcFrequency=M&force_download=true&hostIdentifier=48190c8c-42c4-46af-8d1a-0cd5db894797&indexId=340 )

Year, Me, S&P 500

2005, 13%, 4.91%

2006, 14%, 15.79%

2007, 22%, 5.49%

2008, (40%), (37%)

2009, 44%, 26.46%

2010, 22%, 15.06%

2011, (5%), 2.11%

2012, 13.3%, 16%

2013, 23%, 32.39%

2014, 13%, 13.69%

2015, 1.49%, 1.38%

2016, 20.88%, 11.96%

My portfolio had a cumulative 12 year return of +202.4% vs. +135.7% for the S&P 500.

That translates into a 12 year average annual return of 9.66% vs. 7.41%

Hi Neko,

I checked out the 3% signal at the author's website:

http://jasonkelly.com/books/3sig/

It looks like the essence of the system is that, each quarter, you check the stock. If it went up 3%, you leave it alone. If it goes up more than 3%, you take out the excess. If it grows less than 3% or goes down, you increase it to the 3%.

With the basic stock trading riches system, we are looking to buy or sell back to the constant value at the end of the year if it goes up or down 10%.

To make it simulate the 3% solution, we would recalculate the constant value by raising it 10% (or 12% if you want to keep the 1% per month / 3% per quarter).

So, let's look at 12%. If the constant value is $2000 at the start of the year then, after 1 year, the new constant value would be 2000 x 1.12 = $2,240. So we would rebalance the stock or fund to $2,240.

This would be more aggressive than rebalancing back to a constant value, so you would want to try this either with a fund or with stocks if you are diversified (have at least 10-12 stocks).

Thanks Chris,

I'm glad you liked the book and my method.

Too many sources of information tend to over-complicate trading/investing and, consequently, not enough people take advantage of letting their money work hard for them.

I like it when people realize that investing can be simple.

11 Year Return on my portfolio vs. Total Return on S&P 500 (including dividends)

(Source for S&P500 returns = https://en.wikipedia.org/wiki/S%26P_500_Index )

Year, Me, S&P 500

2005, 13%, 4.91%

2006, 14%, 15.79%

2007, 22%, 5.49%

2008, (40%), (37%)

2009, 44%, 26.46%

2010, 22%, 15.06%

2011, (5%), 2.11%

2012, 13.3%, 16%

2013, 23%, 32.39%

2014, 13%, 13.69%

2015, 1.49%, 1.38%

My portfolio had a cumulative 11 year return of +150.2% vs. +110.5% for the S&P 500.

That translates into a 11 year average annual return of 8.70% vs. 7.00%

I had to modify the script again, so that on the first price (when ovshares is 0) we calculate shares based on control (not vcontrol).

So here is the correct script:

BEGIN {
control = 2000
vcontrol = 2 * control
cash = control
orig = control
}

{
price = $1
value = shares * price + cash
ovshares = vshares
oshares = shares
vshares = int(vcontrol / price)

if (ovshares == 0)
shares = int(control / price)
else
if (vshares > ovshares)
shares = oshares + (vshares - ovshares)
else
shares = oshares - (ovshares - vshares)

if (shares < 0)
shares = 0

cash = value - shares * price
if (cash < 0)
{
value += -1*cash
orig += -1*cash
cash = 0
}
print price" "shares" "cash" "value" "orig
}

Hi Neko,

Below is the modified awk script.

Notice I added a "vcontrol" and "vshares" to track virtual shares. I defaulted to twice the control, but you can change it to any amount ( a multiple of control or an absolute number like "vcontrol = 1300").

It calculates the new virtual shares and then adds or subtracts actual shares based on the change to virtual shares. (it uses oshares and ovshares to store the old value).

So if virtual shares go up by 300, then you would buy 300 shares.



BEGIN {
control = 2000
vcontrol = 2 * control
cash = control
orig = control
}

{
price = $1
value = shares * price + cash
ovshares = vshares
oshares = shares
vshares = int(vcontrol / price)

if (vshares > ovshares)
shares = oshares + (vshares - ovshares)
else
shares = oshares - (ovshares - vshares)

if (shares < 0)
shares = 0

cash = value - shares * price
if (cash < 0)
{
value += -1*cash
orig += -1*cash
cash = 0
}
print price" "shares" "cash" "value" "orig
}

Donald Trump would have been twice as rich if he switched from real estate to stocks.

An interesting article ( http://www.moneytalksnews.com/why-youre-probably-better-investing-than-donald-trump/ ) shows that Trump would have had $10 billion more if he had switched to a simple S&P 500 fund about 30 years ago.

For his value today, Trump estimates it at $10 billion, while Forbes has him at $4.1 billion. They give him the benefit of the doubt and used $10 billion.

For the value in 1982, Forbes had him at over $200 million but said that Trump claimed $500 million. Again, they used Trump's claim.

So, starting with $500 million in 1982, if he had put it in an S&P 500 fund, he would have made (from 1982 to 12/14) an annualized 11.86%, and his $500 million would have become $20 billion.

This shows that simple investments like stocks, which are available to anyone, are powerful.

It also shows that he isn't that great of a business man.

Hi Bob,

I presently own 38 shares of Face Book. Last year, I raised the constant value for all my positions to $3,000, instead of adding more positions.

This part of my system is more discretionary than automatic.

Normally, after I rebalance my positions in Dec, I look at the amount of cash I have. If it is over 30%, then I will buy more positions, otherwise, I will leave it in cash. I want to cap cash to a maximum of 30%.

However, in the case of last year, I saw that a lot of my positions were up, and I seemed to have a lot of stocks, so I decided to raise all the positions to $3000 from $2000.

The WSJ had an article about human stock pickers making a come back.

So far this year, through the end of April, actively managed funds have gained 2.25% (including dividends and expenses), while indexed funds (all indexes) rose 2.2%. The S%P 500 gained 1.9%.

During this same time, my account has risen 3.89%, further proof that rebalancing systems like STR and AIM work well.

Hi,


One of the earliest books that mention it is:

Practical Formulas for Successful Investing, by Lucile (Tomlinson) Wessmann, W. Funk (1953)

10 Year Return on my portfolio vs. Total Return on S&P 500 (including dividends)

(Source for S&P500 returns = en.wikipedia.org/wiki/S%26P_500 )


Year, Me, S&P 500

2005, 13%, 4.91%

2006, 14%, 15.79%

2007, 22%, 5.49%

2008, (40%), (37%)

2009, 44%, 26.46%

2010, 22%, 15.06%

2011, (5%), 2.11%

2012, 13.3%, 16%

2013, 23%, 32.39%

2014, 13%, 13.69%

My portfolio had a cumulative ten year return of +148% vs. +109% for the S&P 500.

That translates into a 10 year average annual return of 9.51% vs. 7.65%

Hi Allen,

They are all "Stock Trading Riches" with different covers and titles. There is no new information in them.

I had been thinking of refreshing the book and there was a publishing mixup, and all the title / cover possibilities ended up live on Amazon.

Once on Amazon, titles stay on Amazon forever. Rather than setting them all to "out of print", we put a note in each of the descriptions saying that readers who have already read "Stock Trading Riches" should not buy them.

Perhaps it would be better if I got them taken out of print.

I'm sorry for any confusion you experienced.

Praveen

Hi Greg,

I can stand the drawdowns because I know it's part of the process. I know that, as long as I have many stocks (or funds) then eventually stocks will bounce up.

I also remember that drops set up big gains. I like to think of it as a wind farm or pump. So, I welcome when the market goes up or down, because it is like wind and it generates energy (profits to be harvested).

Also, I had a big drawdown in 2008 (when everything melted) because I didn't have a big cash cushion. At that time, I think I had put in less than 30% cash. I recommend 30% cash in most cases, and probably 35-40% cash if you are retired, up to 50% to be conservative.

A big cash cushion will keep the drawdowns from becoming too severe.

Praveen

Hi Greg,

If I was retired, I would have at least a year of expenses in a bank account (2 would be safer).

I would use this cash account to pay for expenses, and deposit any incoming money (i.e. social security, pensions, part-time job, etc) into it.

So I would leave the investment account alone during the year. Then, at the end of the year, I would pull out money from the investment account to top back the cash account to 1 (or 2) years of expenses.

Also, to cushion the volatility in the investment account, you can increase the amount in the cash/STB portion - maybe allow a maximum of 40 or 50% cash instead of a maximum of 30%.

Hi Greg,

I was closing out part of my Google account, and it also closed my blog (since Blogger is owned by Google). That's one of the downsides to the way they keep merging stuff into one account .

I am going to start a new blog.

The Stock Trading Riches system should work nicely - I would try and maintain a minimum of 30%-40% in the cash/ST bond portion and, in the stock portion, maybe 10% in a long term bond ETF (that is rebalanced as a stock). For the rest, you can do stock ETFs, mutual funds, and/or individual stocks.

The main thing about stock ETFs and mutual funds is not to hold broad-based index ones (such as the s%P 500), because the diversification within the fund will make it fluctuate less, so they are not good for rebalancing.

It would be better to buy individual stocks and/or sector or industry based ETFS and funds.

For example: communications, financial, banking, small cap, value, growth, etc.

Praveen

"Stock Trading Riches" Was Recommended on Two Different Investing Forums

I copied them to my blog:

http://simple-trading-system.blogspot.com/2013/12/stock-trading-riches-was-recommended-on.html

These new smart phone apps, that allow people to connect directly with taxi drivers, instead of going through a dispatcher, might be helping the value of medallions in the short term.

But, longer term, they may open up taxi markets because drivers without medallions might also start using them.

Also, there are new start-ups that let anyone rent out their cars. What's to stop someone from "renting" their car to someone, but do the driving themselves? So they act as a taxi, but they bypass the medallion?

The Twitter (TWTR) IPO price was $26, but it opened at $45.10, traded as high as $50.09, and closed at $44.90.

If it drops into the $30's, or if it stays in the $40's range for a few days, I may buy some.

My book "Stock Trading Riches" has a section on my successful IPO technique - buying IPOs that have similar market share as a previous IPO.

For example, I bought the Visa IPO because the mastercard IPO was successful. I bought the Chicago Board of Trade IPO because the Chicago Mercantile Exchange IPO was successful, and I bought the Hyatt IPO because Hilton was a successful stock.

Now that the Facebook IPO was successful, I think Twitter will be good also.

Hi Bob,

I bought 49 shares of FB @ $40.19 on 5/18/12.

I rebalance all my positions in December, not on their actual anniversaries, so I then bought 25 shares of FB @ $26.67 on 12/21/12.

So I spent $2636.06 for 74 shares. That comes to $35.62 per share.

As of today, FB is trading at $52.56, so my 74 shares are worth $3889.44.

I will now rebalance the position again in December, where I will sell the position back down to $2000.

Praveen

I read an interesting article in the Chicago Tribune that one of the best investments over the last year is not from Wall Street - but the New York city streets.

The value of a NYC Taxi medallion increased 49% to $1.3 million.

Interestingly, they say that one of the reasons is technology - specifically cabs accepting credit cards and from apps that allow people to call cabs directly from their phones.

Also, the number of medallions is capped at 13,336 - and it is illegal to drive a cab without one.

Hi Clive,

Thanks for correcting me. I just remember that lots of asset classes were down in 2008.

I looked it up and treasury bonds were up 29% and gold up 5.5%. Corporate bonds and many commodities like oil were down - that is why I probably remember many assets being down:


http://3.bp.blogspot.com/_6zFiwogUkPk/SV8f9Iit_BI/AAAAAAAABHY/ttVBtMW_0PU/s1600-h/2008+asset+returns-4.jpg


Your idea about investing 25% in each of the 4 asset classes and rebalancing back shows a lot of promise - it seems very effective and simple.

Praveen

Hi Bill,

1. Yes, the 40% drawdown was because, at that time, I didn't have a lot of cash in the account to cushion it. For my account, I set the maximum amount of cash to be 30% (after that, I use the excess cash to buy more positions). I think I had 10% cash at that time.

Actually, the drop let me test the "doomsday scenario" - I had to add cash from other sources and I didn't have enough to rebalance all the positions, so I had to use the "triage" rule and sell some stocks at a loss to build cash to rebalance other positions.

It paid off with the +44% return the next year - though I made a mistake there. I was nervous with the gains and so I rebalanced in the middle of the year. If I had stuck to my system and rebalanced at the end of the year, I probably would have made more than 44%.

2. Now, I'm keeping more cash in the account to dampen the swings. I'm keeping the cash in a no-load short term bond called AALPX. I also added a couple of REIT stocks.

3. I think non-correlated assets will reduce volatility. Though, in 2008, everything dropped. As far as total returns, I'm not sure if you will still outperform the market, but you should at least match it with less drawdown.

On Wednesday, the Chicago Tribune had an article about how gold and silver prices have declined this year.

The article included a graph showing that, despite the recent declines, the SPDR Gold Trust ETF has returned +94.73% from Jan 1, 2007 through this past Tuesday. During this same period, the iShares Silver Trust ETF returned +48.47%, and the S&P 500 index +13.80%.

My account, which does not have any precious metals ETFs (only stocks, REITS, a short term bond fund, and cash) and has been managed with my STR system, has returned +49.09% during this time period - so I have done well compared to the S&P 500.

This shows the value of good stock picking and rebalancing (buying low, selling high).

The Kindle version of "Stock Trading Riches" is free on Amazon all this week (Monday 5/20 - Friday 5/24)

Here is the link:

http://www.amazon.com/Stock-Trading-Riches-Transforms-ebook/dp/B0065CE3VO

Remember that, to enjoy Kindle books, you don't need to own a kindle. Amazon has free kindle readers for macs, PCs, iPads, etc.

I changed the intro to link to "A Zen Trading System" instead of the old book "Stock Market Riches". The material is the same, but people seem to prefer the new title, and it did go to #1 on the kindle best seller list for business and investing.

"A Zen Trading System" reached #1 today.

I took a screenshot:



The free Kindle edition promotion on Amazon lasts through Monday.

"A Zen Trading System" Reaches Number 3 on Amazon's Kindle Best Seller List For Business and Investing.

For the next 3 days (today through Monday), the Kindle version of my book "A Zen Trading System" is free through Amazon's KDP Select Promotion.

Already (as of Saturday afternoon), it reached #3 on Amazon's Kindle Best Seller List For Business and Investing.

This book is a re-issue of "Stock Trading Riches", with a new title and cover.

If you were ever interested in reading about my "Stock Trading Riches" trading system, now is a chance for you to pick up the book for free.

If you do grab a free copy, I'd appreciate it if you could write an honest review on Amazon, or at least let others know of the promotion so that they could download the book.

Thanks!

I recently received 2 new email testimonials from readers of my book "Stock Trading Riches":

"A Wonderful Book... I probably would choose your system as it is simple, easy to use, and not bad performance based on my random testing at present."

Kevin W.


"I read your book in about 2 hours. I like it a lot. I like books that are written in simplistic ways and yours did that. More importantly, it was clear that you had a lot of insights to present to your readers and for which I learned a bit. "

Narin A.

I keep the cash part of my account in the American Beacon Short Term Bond Fund (AALPX), which is no load.

2012 Return On My Portfolio

For the past 8 years (2005-2012), I have been using my Stock Trading Riches system to manage my portfolio.

While I tied the market in 2012, I have beaten the S&P 500 over those 8 years:

Year, Me, S&P 500

2005, +13%, +4.91%

2006, +14%, +15.79%

2007, +22%, +5.49%

2008, -40%, -38.49%

2009, +44%, +23.5%

2010, +22%, +13%

2011, -5%, 2.11%

2012, +13.3%, 13.4%

My portfolio has had a cumulative eight-year return of +78.31% vs. +27.37% for the S&P500.

Hi Conrad,

I found it interesting that you are selling options. I know that, as a seller, time decay works in your favor, but AIM / AIM like systems are not designed to go short.

In the past, I've thought about using long options rather than stocks with my "Stock Trading Riches" system (these thoughts would probably also apply to AIM and Vortex as well).

My thoughts would be that:

1. You would initially purchase options as far out as possible.

2. Every time your system gave you a buy signal, you would buy the amount using options as far out as possible (rather than buying the same expiration that you did originally).

3. When you got a sell signal, you would sell the options that were the closest to expiration.

4. If any batch of options were getting close to expiration, you would sell them and buy enough far out expiration options to keep the total value the same.

Hi 1step,

Thanks, I'm glad you're a big fan.

You don't have to buy the new books - they are just abridged versions of "Stock Trading Riches". I was experimenting with different titles and lower price points to attract new readers. I'm not advertising them - they are aimed for people browsing Amazon for lower priced titles.

I'll have to be more careful so people who bought "Stock Trading Riches" don't buy what is essentially a subset of the material. I'm going to add a note to the descriptions that they are abridged versions.

Praveen

Happy Halloween!

http://ak.imgag.com/imgag/product/preview/flash/bws8Shell.swf?ihost=http%3A%2F%2Fak.imgag.com%2Fimgag&brandldrPath=%2Fproduct%2Ffull%2Fel%2F&cardNum=%2Fproduct%2Ffull%2Fap%2F3125133%2Fgraphic1

You also might want to look into healthcare. The demographics of the U.S. and other developed countries are getting older.

Also, the 1990's bull market was driven by industries and their logistics being affected by technology, but health care was an exception because the doctors, etc. resisted. It's only a matter of time before technology drives change to health care.

At first, Romney said he would repeal Obamacare, but then he said he would keep the parts that people like.

Even if Romney wins and does repeal Obamacare, and they switch Medicare to vouchers, health care stocks should still do good.

Thanks, Tom

The odds are very likely that Obama will win re-election, so I think that is probably already priced in the market.

If Romney wins, then the market might get an initial bump, but will probably fade.

I learned from reading Ken Fisher that the markets are contrarian when it comes to presidential elections. I wrote about it on my blog:
http://simple-trading-system.blogspot.com/2008/08/how-will-presidential-election-affect.html

Today, a reader posted a nice, detailed 5-star review of "Stock Trading Riches" on Amazon.com:

http://www.amazon.com/Stock-Trading-Riches-Powerful-Transforms/dp/1434809870

"I am a short term trader by heart but needed a system to manage my retirement accounts and this one certainly works very well.

I used the excel sheet provided in the book to test dozens of random stocks over the past 6 years and about 80% beat Buy and Hold over the same time period.

The results were good but I needed more proof since the market conditions of the last 6 years did not capture every possible market scenerio.

With the excel sheet , I simply created every possible market movement I could think of and still my results were very good.

This is the kind of system someone with very little investment or trading experience can pick-up and implement right away,that's how simple it is. I found that it will work for retirement accounts and trading accounts.

Many times ,especially those of us who are traders, dismiss the simple for being ineffective but the truth is the more complex the trading system the more likely it is to fail over time.

And oh yeah-what I love most about this book-he gets right to the point and shows you how the system works. No beating around the bush for a 100 pages."