Replies to post #1211 on A.I.M. Users Bulletin Board (AIMUSERS)

[husk]

Hi Conrad;

There is a lot to be said for keeping things simple, I agree....I think that AIM BTB is an excellent way to go, particularly for beginners.

My experience is the only reason that I am modifying BTB...I unfortunately participated in the huge drawdown from 2000-2001, kept my SAFE levels set at 10% and was happy with each buy I made, because it was at levels well below the previous buy.....in other words AIM was doing a teriffic job of directing the disbursal of the cash reserve. No one (I venture) expected the decline to reach the 70% or whatever level that it eventually did. My cash reserve was depleted after about a 30% decline, so I was never able to buy at or near the lows that were reached.

Your point is well taken, that the max profits would be made in buying the max amount of shares at the bottom......but how do you know beforehand where the bottom will be?

If one knew the shape of the market moves, it would be relatively easy to maximize the return.....lacking that knowledge, one must determine the risk/reward ratio that he/she is willing to tolerate......AIM, after all is a risk management system.

I think that yours is a fairly aggressive system that may well be the best over the next market period......mine is more conservative, in that I want to slow down the buying by increasing SAFE when I have sequential buys.....and in my Precious Metals fund that "could" have a large upside, I want to slow down the selling as well, so that I have more shares to participate in the growth........heck if I know if it will be best to do that,...I guess we will only know after the fact.

I think all of us AIMers like Lichellos concept...most of us like to adapt it to fit our situation.....but those who go BTB may well be the smartest of all.

Regards

[Sarmad]

Hello Conrad,

-- Lichello never made a million dollar with his AIMs...he was too busy tinkering with it...

Lichello never made the million because his method cannot possibly make a million (out of $10k) - except with a contrived example. There is no way to get big gains without risking a wipe-out. And if AIM is protecting us from a wipe-out, it is also preventing us from getting a big gain. Which is just as well, because the risk of losing all is much more than striking it rich.

The real fatal flaws in Lichello's AIM is that it provides no help in choosing stocks, nor does it give guidance to when to make the initial buy, and at what price. Neither does it reduce one's risk in losing the whole account in a "calamity stock".

The "original sin" of Lichello's AIM is its implicit acceptance of the initial investment share price as the fair or referance price of the stock. And a deviation from it "up or down" is to be compensated for by buying or selling. A proper method would strive to discover what the equilibrium price is (from its history), and only then would strive to counter an up move by selling, and a down move by buying.

Possibly I am being unfair to Mr. Lichello and AIM through ignorance. If so I apologize, and am open to being corrected.

Regards,
Sarmad