Systematic Investing Group

[karw]

Hello Barry,

I cannot give you an answer to question 2 and 3.

However I have some ideas about the evolution from dollar cost averaging to AIM. This based on playing with spreadsheets where you can see the logic of each new invention.

I think you have 2 evolution lines:

1 - Dollar Cost Averaging, Double DCA, Synchrovest. Here Synchrovest is the fittest survivor.

2 - Dollar Cost Averaging, Value Cost Averaging, AIM.
Here AIM is the fittest survivor.

Evolution Line 1 is well decribed by Lichello.

Evolution Line 2: Value Cost Averaging(see the gummy stuff website at www.home.golden.net/~pjponzo/gummy_stuff.htm for a good explanation of VCA and much more)introduces the concept of Portfolio Control, although it is not recognized as such. If you make a spreadsheet with the classical Lichello series 10-8-5-4-5-8-10 you can see that VCA does not perform well(you can vary the periodic VCA amount and for example set it to zero to get to AIM). Then introduce SAFE(10%). Then run the spreadsheet again. You will see the Lichello wonder. If you reread Lichello's book again, with the above evolution path in mind, it all makes sense.

Now you can also understand why Lichello keeps the once a month rhythm. It still is a trait from DCA and VCA. However in AIM it has no real function anymore and can be replaced by Price based action as in TMS. So you can see that I believe that TMS is a life-form from evolution branch 2!

In my next post I want to describe how Synchrovest and AIM can join again and make a new monster!

Greetings, Karw