Replies to post #1184 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

One more thing about 'vealies'

When looking at total return and then also "return on capital at risk" we see an interesting thing happen with 'vealies.' Total return will grow while ROCAR will start to plateau.

After a long Bull stretch there will have been several vealies and sales in a row. These will have let the Total Return grow, but the average percent at risk has remained relatively constant. This is what causes the plateau of ROCAR.

My general rule is that any AIM change that is good for Total Return and benign to ROCAR is probably a good move. If Total Return goes up, but ROCAR goes lower, then we've just made gain by risk extention.

Best regards, Tom

[extelecom]

Tom / Conrad - Turbo Vealie, I just liked the name!

et

[Conrad]

Hi Tom,

Your considerable insight into the matter allows you to add more qualifications on the whole idea. Thanks I agree that pulling more that a Standard Vealie increases the risk as ore cash is pumped into the AIM...but the same would have been true is you would have started with a bigger AIM, say 50 000 instead of 10 000. The Turbo Vealie would simply raise the portfolio value...you now have the cash that you did not have before. The fact that with a bigger portfolio and the raised pc there is a bigger risk is offset by the increased also add extra cash with raising the pc with 100% of the extra cash and set the pc=stock value. If the stock is doing well it makes little difference how it is done exactly. All this assumes that other options such as diversification is not desirable. Sticking with a winner is in any case a good thing to do.

Also, the idea of a cash ceiling is for me personally an unnatural thing as I have the natural tendency to invest already more cash than I have...my portfolio is never cash rich.

As for the ET-suggestion to use a stop/loss at the top after pulling a Vealie, or a Turbo Vealie, this in my view more a matter of protecting what you have gained already rather than a matter of optimising future gains. As the pc is raised in the Vealie and the stock price drops there is a new Buy Signal and that means that it would be OK to sell the whole portfolio to save it from erosion...it would still be a sensible thing do if there is any anxiousness that the drop will be very big one...taking a big profit doesn’t make you go broke.

I tend to agree that after one has made a good profit that bailing out may be quite a logical thing to do. To make a few extra dollars with a different method is then not a relevant issue...It might be a good time to do something else with the money!

Conrad