Systematic Investing Group

[Conrad]

Lay-Away Plans,

Hi LC, the recent communications on Vortex failure start-up in the US has led me think back on our discussion years ago on the Lay-Away Plans(LAP) that you are promoting for investors wit a small income. At the time I dived into these plans but since then have not done and "streamlining" of my understanding of them.

As I remember the essential idea was to decide on say a fixed monthly investment of say $ 100 or $ 120 per month, and just like as is done in regular AIM, top split this up into an Equity Part(EP) and a Reserve Part(RP) according to some Split Formula. The details of these split functions have escaped my memory. I understand there were a number of different LAPs you promoted.

The essential feature of these LAPS were, if I remember it correctly, that each monthly payment had a Micro AIM Investment structure. The Equity and the Cash followed a Cash Equity Ratio(CER) based on the prevailing market conditions. I try to recapture how it worked: Suppose an investor would have wanted to invest $ 20000 with 60% equity and 40% Reserve but does now have the savings to do so but can lay-away $ 120 per month from a fixed income structure and a small amount of savings, say $ 1000. He could start with 120 per month but he could also start with his savings and begin with a 1000 total investment. Let's assume for now that the basic trade function is similar as in AIM so that the Trade Functions based on share prices in some functional relationship:

Staring Point . . . (in case $1000 would be available)
Total Investment = 1000
E= 600
R= 400

Thereafter the monthly Lay-Away = LA = 120 would apply as a Micro AIM Investment.
PC= 72. . . .If one would use a 120 investment per month
E= 0,6*120 = 72
R= 0,4*120) = 48

Portfolio Statement after 1 month(assume no price change has occurred):
Equity = 600 + 72 = 672
Reserve = 400 48 = 448
Portfolio Value = 1120

Trade Functions for the monthly Lay-Away:

Buy = (PC - V)*Mb. . .Your Special Buy Function to calulate Mb(1)
Sell= (V - PC)*Ms. . .Your Special Sell Function to calulate Ms(1)

Essentially the $ 120 monthly investment is treated as a Micro AIM and each month the $ 120 Lay-Away is split up according to variable CER that is determined by price development.

Note(1)= I understand that for each LAP there is a unique Trade Function, but a buy or sell would essentially be a function in the form of

Y= ax + b . . . . .(b may be negative or positive)

OR if desirable

Y=ax^2 + b

for a more progressive trade function with price schanges "x", if that would be considered desirable.

With V the equity value after one month. . . let's say that V= 60 after a price drop and that Mb=5.
The Price Change = 12/72*100 = 16,7 %

Buy = (72 - 60)*5 = 60

The 120 monthly investment is split up as follows:
Equity in new Shares = 60
Reserve = 60
Number of Shares = 60/Price

The original investment of 600+72 after the 16,7 % price change, is now worth 560

New Portfolio Statement after 2 month
Equity = 560 + 60 = 620
Reserve = 400 + 48 + 60 = 508
Portfolio Value = 1128
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The interesting feature is here that using for each LAP a different Trade Function one gets a unique Set of Trade Functions:

Buy = (PC - V)*Mb = Yb=Fb(x). . . .x = the Equity Value Change
Sell= (V - PC)*Ms = Ys=Fs(x)
For each LAP

The interesting feature of this is that the Trade Function for each LAP has an Identical Form as the VORTEX AIM Trade Function for the linear case. The functions for the values of Mb and Ms can of course also be make non-linear if that would be desirable.

The point being here is that for the LAP applications one can easily use the Windows version of the Vortx AIMing Method, and with a small modification of the standard VORTEX Trade Function it can be tailor-made for your LAP versions instead of an Excel Spreadsheet.

Trade(buy) = (PC - V)*Mb . . .Mb & Ms to be defined per LAP
Trade(sell) = (PC - V)*Ms. . . . A negative number

The Vortex AIM program could be used for all your LAP applications.

Should this be still of interest to you we could discuss modifying the Standard Vortex AIM program to Vortex LAP versions. . .more or less in the line of our previous plan years ago, which I called at that time PremiVest.

PremiVest is still an Option for the Vortex AIM program, but it is not fully developed yet for release as the specif is LAP trading functions have not been developed. I have developed it for a typcal Vortex AIMing way. If enough interest develops we will consider making this option available for specific LAP investments.

Regards,
Conrad

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