Replies to post #37843 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Welcome SFS,
I hope all your questions will be answered by various parties here. We also have a pretty good Q&A page here on I-Hub:
http://investorshub.advfn.com/AIM-%22In-Depth%22-Q&A-992/
and there will be several subjects addressed there that will interest you.

Three things to keep in mind as an investor and a fiduciary:
We invest for 1) price appreciation over time, 2) dividend capture over time and 3) profitable volatility capture over time. These are the goals of a well designed plan and are not mutually exclusive at all. Your overall goal is "total return" and the mix of the three will be what creates that.

A "growth" stock may fall more towards #1 where a mature dividend payer is gaining from #2 as well as #1. Both kinds of stocks (or ETFs) can benefit from #3 given enough time.

There are a few of us that used Merriman's "Ultimate Buy/Hold Strategy" as a basis of portfolio design. We looked for ETFs that generally matched the UBH model and populated the portfolio with those. Then we applied AIM to the individual components. This has worked well enough through many types of markets. Karw, renamed this portfolio "Ultimate Buy and AIM" or UBA.
Read more here: http://paulmerriman.com/the-ultimate-buy-and-hold-strategy/

1) The AIM-Hi variant is the same apple as regular AIM with the difference being a lower initial cash reserve and bigger bites being taken when trades occur (larger minimum trade size). The combination reduces trade frequency, gives a mathematical advantage to gains but magnifies losses by the same mathematics (Equity/Cash ratio) but also limits the number of buys that might occur since the cash level is lower.

Traditional AIM creates a hold zone of about +or- 15% from the starting point or roughly 30% LIFO gain between a buy and a sell. AIM-Hi increases that to nearly 40%. That's why the trade frequency drops.

4 & 5) Which is better? It's less AIM work to manage an entire portfolio in one AIM engine. However, since it is a volatility capture device, it needs volatility as a driving force. Using one AIM engine on an entire portfolio tends to dampen overall volatility (some holdings are up while some are down and are self cancelling). So, if you want the most capture, AIMing individual investments tends to do so.

That said, individual companies can prove to be almost too volatile and also involve "single stock risk." A good half way point is to AIM individual business sector ETFs. You get most of the amplitude of price range of the Sector but considerably reduce the "single stock risk." So company stocks have the highest frequency and amplitude of price change, Sector ETFs have good in this area and Diversified Mutual Funds are the lowest of the three categories. If you sleep well, then you can use investments with higher frequency and amplitude of price range. If you're a worrier, then pick from diversified mutual funds for your portfolio.

6) If you pre-calculate your "next buy/sell" target prices using the AIM Trade Price Calculator ( http://web.archive.org/web/20120609073103id_/http://www.aim-users.com/calculator.htm ) and ETFs or stocks, you can enter "Good Until Cancelled Limit Orders" on your holdings and then go mow the lawn. The orders will take care of themselves. All you'll need to do is report the trades when they occur back to your AIM spreadsheet(s). This keeps the effort to a minimum. The trades will occur when they occur rather than when you update your spreadsheets.

I hope this gets you off and running! Please feel free to ask questions as they arise.

Best regards,

[Toofuzzy]

Hi sf security

It is easier for me to write this assuming you know absolutely nothing about investing but I dont mean to insult you.

YOU SHOULD PRINT THIS OUT AND SAVE IT

1) use standard AIM. Forget all variants. Other will disagree.

2) Only use ETFs ( exchange traded funds) . Funds can not go to ZERO. That is important as AIM has you buy more as a security goes down. Many can be traded for free, either thru Vanguard or some of the large discount brokers.

3) Decide what you want to own for the rest of your life, AIM works over time and market cycles. You can divversify by either style or industry. Style might be large, small, forein, REIT, and bond. Industry might be oil, financial, medical or biotech, mining or minerals, technology, whatever you feel might drive the economy.

4) AIM each fund seperately

5) Start each fund with a minimum of $10,000 in stock. That will give you a min trade size of $500. You do not want to be bothered trading less than that. You can use 50 % cash ($10,000)
or the V Wave to set INNITIAL CASH RESERVE.

6) You do not need fancy spreadsheets to do the calculations, I use paper and pencil.

7) Trade only once per month. At first as a discipline, only trade on the same day per month. Later on if you want you can trade on any day as long as you did not have a trade within a month in that security.

8) I use an index card with my securities and their HOLD ZONES written on it. All I have to do is scan the card to see if I need to figure out an actual trade. The hold zone is a bit of a pain in the ass to figure out so I wrote a little program called the QUICK AIM CALCULATOR which Tom put a link to in his post to you. If you copy and paste it in to an e mail to yourself you can then move it to a file in your computer. DO NOT RELY ON THIS PROGRAM TO GENERATE YOUR TRADES WHEN YOU FIRST GET STARTED. It is important to learn how AIM works and to understand if you might have made a mistake entering the imput in to the program. Also some people have had trouble moving the program to a different computer platform. You can use it directly from the link though.

Not always,
Toofuzzy

[Conrad]

Hi SFSecurity,

You asked an interesting question in point 3 of your List:

"Does any of the software like VORTEX make sense or should I just rely on my spreadsheet skills, which are fairly good?"

1 Comparing VORTEX-AIM with AIM is like comparing a particular Apple with another Apple :-) The basic principle of creating a Trade Advice based on an equity Price Difference is the same. With a particular set of parameters each for VORTEX and AIM, to start off with the same capital and same equity the Trade Advice Algorithms can be "matched" to perform identically initially and then over time the Buys and Sells will diverge slowly, depending on how the equity price behavior evolves. Generally different AIM users make personal choices, bases on experience, or on their feeling about the equity that invest in and small differences in parameters will cause different long tern performance. . .one of them outperforming the other. In that sense Vortex and AIM can be regarded to be very similar "Apples".

2 Over the many years I came on this Forum there have been heated discussions on the differences between and we ran Various AIM Contests to see how the various AIM Derivatives performed on a Particular Test Data Set. The point here being is that each Contestant used his favorite AIM Variant, setting the parameters as each AIMer thought best. VORTEX usually edged in front of the others, but this was more because I was a rather aggressive investor so that I tend to "capture" volatility more efficiently rather than Vortex being "better". In that sense VORTEX is "better" for someone that has learned to acquire the skill to set the VORTEX parameters optimally for a specific equity, compared to someone using AIM and has no skill to use AIM optimally. VORTEX is simply a bit different. . . not better. . .

3 I suggest that you follow the advice of TooFuzzy and first get to know how AIM works using pencil & paper if you have not actually done that yet. After that you would be ready to consider VORTEX and find out if it “clicks” for you.

4 The interesting difference between VORTEX and AIM is that I have eliminated the Lichello Residual Buy so that after any trade. . .a Buy or a Sell. . .the Trade Advisor Generator gives “0” as Trade Advice. This is intuitively very logical because after executing a trade you do not want to trade at the same price again but you need a Price Difference to generate a Trade. This means that after any trade in VORTEX PC=Value so that (PC-V) = 0 by creating the PC-Update Formula

PC2 = PC1 + f*Buy Amount

with “f” being a Trade Aggression Factor. For AIM f=0.5 so I simply held on the basic AIM Idea but made the PC-Update a variable that automatically resulted in PC=V to give the Zero Advice (PC-V=0.

5 A second change I introduced as a consequence of (4) is more subtle: For a Sell I also changed the PC

PC2=PC1 + f*Sell Amount.

This produces the interesting effect that VORTEX behaves as a Ratio Trading System in the algebraic sense that Y= Trade Value and X is the Price Variable

For VORTEX: Y = aX
For AIM: Y= aX + b

Other that this subtle difference, creating a subtle Advice development over time, for both VORTEX and AIM The Trade Aggression that the investor can set that as he pleases:

In VORTEX the “f-Factor” is increased for getting greater Trade Aggression
In AIM the “SAFE Factor s” is decreased for getting greater Trade Aggression.

Once you have learned what these Vortex-parameter settings will do for the Trading Behavior then you can Set VORTEX to your hand to behave optimally.
The same is equally true for AIM when you have learned what the SAFE.

In the VORTEX Program there is an additional comprehensive Investment Administration Section included as well as a feature to monitor the Portfolio History automatically in Report Form. A very handy VORTEX feature is the Automatic Down Loading of stock prices from Yahoo.

For an AIM Beginner VORTEX will take a considerable amount of time to master all the features, so I advise against buying it right away. . it would take you time away from learning all the things AIM can do for you.