Hi Aim Hier, if you can find a copy, this is a very good book to read on formula plans, Practical Formulas for Successful Investing by Lucile Tomlinson, she has some original research on constant ratio plans (now called re-balancing), and variable ratio plans. The constant dollar plan is a simple to operate variable ratio plan. But it has a problem, if you use it over several cycles it will shift more and more of the portfolio to the cash side, and not use it at the market lows. This is why the plan is not popular today. Her fix for this problem was to increase the constant dollar value every so often to equal the amount of money invested in the stock, she suggested doing this at the market low, that way you delay selling. She also talked about dollar cost averaging, and how it should be restarted after showing a 45% profit on money invested. She said it could also be combined with a constant ratio plan, the money would go to which ever side was low in value. I have always thought that Mr. Lichello must have read that book.
You said, If you traded a constant dollar plan with regular increments to portfolio control (say 0.75% a month), this is very much like Value Averaging by Edleson from his book (Value Averaging).
Come see me at Systematic Investing group #board-966 lets talk formula plans.
