Was wondering what are the major differences between the VORTEX method and Constant Value (Constant Dollar) method?
The reason I ask is that it seems to me that the purpose of VORTEX is to eliminate the Residual Buy feature of AIM. Constant Value investing does that because after a Buy is made there is no residual value for the next Buy. The next Buy is based upon the percentage of the last Buy price and the amount being purchased.
For example assume that an investor has $100,000 in an stock. His purchase price was $10 a share and he bought 1,000 shares.
He now decides that he will make that $100,000 investment a Constant Value to base his buys and sells around. The share price for his investment was $10 a share. He also decides he will use a 10% setting to buy or sell ($10,000) of his $100,000 investment. Now then, in the event that the $100,000 Constant Value changes by either a 10% increase or a 10% decrease he will make a transaction.
(By the way, the investor doesn't have to use his actual investment cost as his Constant Value...he can use whatever Constant Value he chooses; much like in LD-AIM investing where he decides if he will use 2X, 3X, or whatever shares whenever he decides how many virtual shares he will use in his LD-AIM program).
Buy = $10 share purchase price decreases 10% to $9.00 a share. He would purchase $10,000 of stock or approximately 1,111 shares.
The $9.00 share price is now the base share price in which he would use to decide his next buy or sell.
Assume the share price now declines another 10% from his last purchase made at $9.00 a share. This means the share price is now $8.10 a share. He would make his next $10,000 purchase at $8.10 a share, which means that he would buy approximately 1,235 shares.
Sell = Assume the stock now increase 10% from $8.10 a share to $8.91 a share. He would now sell $10,000 of stock at $8.91 a share, or approximately 1,122 shares, which had a LIFO accounting cost basis of $8.10 a share.
After this Sell, this means he would have in his stock inventory 113 shares with a $8.10 cost basis, 1,111 shares with a $9.00 cost basis, and 10,000 shares with a $10.00 cost basis.
So, you can see that there is no Residual Value after a buy in Constant Value investing the way there is in AIM. Also, one can change the settings in Constant Value to whatever one chooses to be either aggressive or conservative in their investing approach. Either way they use their settings the next buy is based upon the price of the last buy, not because increasing the Portfolio Control creates a residual buy amount in AIM investing.
Conrad, to be honest I have read the explanation of VORTEX several times and I just can't get the hang of it. If you could tell me how in differs from Constant Value investing I would greatly appreciate it.
Best regards,
Ray
