Replies to post #29407 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Hi Jim.

It seems in reading current and former posts that very few actually follow the AIM method as it is written. Everyone seems to tweek it to fit their own desires. So my question is: if this system is actually good why don't users follow it?

We tend to follow the concept rather than the literal.

Buy and Hold is flawed. It's a dynamic risk style that amounts to buying high, selling low (an anti-martingale style). AIM is a martingale style that has more constant risk - a buy-low/sell-high style.

There's a long winded mathematical proof that shows a AIM like style is the better choice overall.

Fundamentally it boils down to that under pure random conditions both martingale and anti-martingale are zero sum games. Under stocks however there are finite possibilities, a stock price cannot decline below $0.

Typically progressive systems give the player more paths to relatively small wins and fewer paths to relatively large losses. What AIM does is to use a progressive d'Alembert betting sequence style that aligns the few large losses with that of a zero (or low) stock price. When therefore the prospects of such a large loss are mitigated by using Index funds (that are much less likely to go broke) then the overall becomes a positive sum gameplay.

If you follow AIM religiously then you will never lose excepting if your underline holding totally fails. You can however tweak the classic settings to vary the amount before you become locked into 100% buy-and-hold type conditions. Those tweaks can uplift (or reduce) the volatility capture benefits encountered along the way. So the tweaking is simply attempts to improve upon overall investment rewards in reflection of projections (predictions). Where those predictions prove to be reflected into actuals then gains can be improved - get them wrong and gains wont be as good. Classic AIM sits somewhere in the middle of the two.

Best. Clive.

[AIMster]

It seems in reading current and former posts that very few actually follow the AIM method as it is written. Everyone seems to tweek it to fit their own desires. So my question is: if this system is actually good why don't users follow it?

Hi, Jim,

Welcome. Good question.

One can think of Lichello's original AIM as by the book as a template. One must keep in mind especially the time that he was developing it, the mid-to-late 1970's on the heels of the 1973-1974 bear market. Personal computers were in their infancy, to buy or sell stocks was done under fairly expensive commission rates, information was at best derived from the daily newspaper or public library.

Even Lichello himself revised his system from the original first edition 50/50 ratio to subsequent 67/33 to the final AIM-HI 80/20. So he wasn't adverse to change, nor did he mandate that the 1.0 version of his system was the be all and end all for this type of system.

What you'll find is that people have been taking the core idea, a algorithm to encourage the "buy-low, sell-high" idea and trying to make it better. One limitation, for example is that available cash is finite. So what's the best way to have enough cash so that you can still buy at the bottom and not run out too early? Should one AIM each stock individually or as a whole portfolio? What about ETF's - investing instruments that didn't even exist when Lichello started working his system? With more information available over the 'net, how do you separate the good stuff from all the fluff?

Also where people are with the amount of money to invest will influence how they proceed. A person with $100,000 to invest has more options than someone with $10,000, for example.

AIM falls in the general class of investing strategies known as "core position trading." Google that term to learn of even more variants, if you wish.

Thanks for your question! If you have more, please post away!

Best,

AIMster

[The Grabber]

Re: AIM method as it is written

Hi Jim and welcome to the board! I've seen the other replies and would only offer this in addition:

If your system uses Portfolio Control along with its incremental adjuster at purchase and Safe (resistance), then you can probably feel comfortable in giving it the AIM tag. In my opinion, Lichello 'hung his hat' on these 3 aspects of his system. Both his book and infomercial focused on them as I recall.

There are any number of 'core position trading' systems out there that came before and after AIM but not with those 3 (albeit maybe similar and called something else).

As for your 'very few actually follow' comment I'm not so sure. I've been a member of this board here and at Silicon Investor for over 10 years and know that there are many traditional AIM users who lurk here but never sign up or post.
I think Tom has some statistics on unique visitors, and they are legion.

As for the 'Tweaking'...Who knows? For my part, any tweaks I do are in the interest of improving ROI. Can't argue with that.

AIM (and any other system) is not a 'Magic Bullet'. If it were, we'd all be 'Gazillionaires' by now <smile>.

[Toofuzzy]

Hi Suncat

>>>>>It seems in reading current and former posts that very few actually follow the AIM method as it is written. Everyone seems to tweek it to fit their own desires. So my question is: if this system is actually good why don't users follow it?<<<<<

1) Because it is Sooooooooooo simple and since you only need to look at your holdings once / month people get bored. (Guess they don't have enough other interests)

2)There would be nothing to talk about on this board!

Any "RESEARCHED" improvements are usually because of data mining. They worked in the past but MAY not in the future.

For instance, using 2x funds lead to greater volitility capture in a range bound market, but when the market crashes and burns you may run out of cash too quickly bringing the AIM program to a halt. Same with trading more than once / month or using a smaller hold zone.

It is good to start with a specific plan (and to know why) and stick to it. The tendency is to make emotional changes at just the wrong time.

Toofuzzy

[jibes]

Jim

You said:
"It seems in reading current and former posts that very few actually follow the AIM method as it is written. Everyone seems to tweek it to fit their own desires. So my question is: if this system is actually good why don't users follow it?"

Part of the problem is not knowing the future. If you knew the future you would know when to be stingy on the cash and wait to buy at a better price or sell when the price is best. But if you knew the future then you wouldn't need AIM at all.

One problem that users run into and why they tweak the method is running out of cash. I think the best way to avoid this is to do a few aim stocks and keep them fairly conservative in nature. If the issues are wild a big drop can use up cash very quickly. This market would have been devastating to many AIM users even by the book. One can tweak AIM to get better gains but this can cost you a lot in a major drop.