A.I.M. Users Bulletin Board

[AIMster]

Of all the "doctrines" that seem to be popular, and of all the 'tweaks' to AIM we've largely implemented, keeping the portfolio control incrementation rate at the Lichello standard of 50% of the transaction size seems almost inviolate. Yes, people have spoken of increasing the portfolio control amount as an inflationary consideration, but I don't think the basic rate of incrementation has been changed, or at least, not so much.

I haven't done exhaustive research on it yet, but it seems there are advantages in treating the PCIR (Portfolio Control Incrementation Rate) as a tunable parameter. Case in point is AVCI which makes the top of the list in the Value Stock Selector as having a potential return of over 1,300% based on calculations derived from the fundamentals. As you can see from the chart, it looks like a good candidate for AIM:



Using the current range of the chart (early '05-'08) I ran a test on it and AI indicated a return of 104% using Lichello's original 50/50 formula and the "standard" PCIR of 50%. Leaving everything else the same, and dropping the PCIR to 45% gives a return of 107% or 3% better. On this particular time range, 45% seems to be the heart of the "sweet spot" for PCIR, with results diminishing outside of that range.

Through the magic of 20/20 hindsight via historical testing one can find such sweet spots which may well change over time. So other than theoretical knowledge, does this have any practical application? Truth be told I don't know. Did Lichello make a reasonable guess with the 50%? Probably. Is it ideal? Maybe. Or not. Still, an additional 3% or so, over a long term could add up to quite a few extra dollars, euros, pounds or whatever in one's account, so it may have some value. The problem is we don't know what that optimum value is in advance.

Musings...

AIMster