Replies to post #38713 on A.I.M. Users Bulletin Board (AIMUSERS)

[The Grabber]

Hi Bob.

I have never thought of LD-AIM as "adding to the Leverage factor".

You were correct in that non-thought! :-)

You didn't ask me but since I get frustrated sometimes with how LD-AIM is 'explained' out here, I decided to comment.

Volatility has nothing to do with it.

The 'leverage' that LD-AIM does provide is that you have less capital at risk (actual shares' portion of your initial core position) relative to Classic AIM.

Everything else being equal, and until you sell out of your Actual shares, an LD-AIM program will perform exactly like a Classic AIM program up to that point in time, given the same initial Portfolio Control and other settings. The difference being that your ROCAR (Return on Capital at Risk) will be higher with LD-AIM. And, God forbid, if your stock or fund drops to 0, you will lose fewer real $.

LD-AIM is all about better relative ROCAR and to me when I designed it, more diversified deployment of capital.

The initial intuit I had when designing LD-AIM was that if you look at Lichello's original example, on a LIFO basis, he never sold his initial core position.
In effect, that initial Buy served no other purpose than to set the initial Portfolio Control.
IMO, kind of an expensive way to set a number.

Now, LD-AIM presupposes that unlike Lichello's example, the price might actualy rise after the initial Buy. So, you get to decide going in how many consecutive Sells might occur without an intervening Buy and actually buy enough shares to cover that.
If it were to occur, you would still realize the Minimum ROCAR that is calculated with the LD-AIM spreadsheet. Still a big win.

[Toofuzzy]

Hi Bob

If the underlying index to a 3x fund drops 33.3% IN ONE DAY the 3x fund will drop 100%. There is nothing left to do a reverse split with. If it drops over time they can do a reverse split.

LD Aim

If you invest $5,000 in stock but pretend you have PC = $10,000 your trades will be twice the size, hence the leverage I mentioned.

Hope that helps
Toofuzzy