Quick thought on the AIM algorithm. I've looked at the various equity/cash thresholds, but they all don't address the fact that over time, the portfolio control will grow to have a positive sell bias because it's underweighted from ignoring the expected growth in the market.
It seems an obvious choice might be to make a subtle tweak in the algorithm itself by adjusting the Portfolio control. There are a couple of thoughts, but the simplest might be to adjust the portfolio control by increasing the value monthly [or based on whichever time frame is selected] to factor in an annualized average market increase. Let's say that average is 9.8% per year.
Every time you run the algorithm, you would increase the portfolio control by adding the adjusted annualized increase of the initial equity investment. So for example, if you put in 5K the first month. The second month, the average annualized increase should be roughly 5040. So when comparing the stock value, you would compare it to the updated portfolio control. The following month, the portfolio control would be updated to 5081 and so on. If the stock is a dividend yielding stock, you could reduce that percentage by subtracting the annual dividend yield.
Of course, you could adjust the annualized percentage to fit the average return for that sector in the market. There also could be a few more complicated options that factor in original, historical, medium, and short term averages. Another option is peg the Portfolio control to another algorithm based on PE ratio for that stock. Again, the PE ratio could be a historical average for the stock, sector, or overall market and could be modified to factor in long, medium, & short term trends.
You could consider a weight of say 1/3 historical, 1/3 3-year, & 1/3 1-year performance for the annual rate of return and/or the PE ratio used to adjust the portfolio control. This way, you could benefit from trends in an up market and reduce risk in a down market while keeping the portfolio control at a reasonable value that doesn't lose it's significance over time.
