Replies to post #2975 on A.I.M. Users Bulletin Board (AIMUSERS)

[Rien]

Hi jibes,

Seems you found a way to profit from sector rotation :-)
Pressed for time, I did'nt have the time to read it all. But it seemed to me that the four (or 5) stocks needs to be in different sectors for this method to work really well.
All in all, you use AIM for cash/portfolio-value allocation, and add sector rotation for an additional performance boost.

Even though we like to use AIM for profit scalping on high volatility stocks, it is good to be remembered from time to time that AIM is also a very good over-all allocation model. (i.e. it can be used to control the extend of market exposure of your available investment money)

Best,
Rien.

Best,
Rien.

[karw]

Hi Jibes,

Very nice and very clear story!

A nice addendum to Lichello portfolio theory!

I was close to doing the same as you did. You gave me the motivation to focus on this and implement something along these lines in my own portfolio.

Thanks for sharing your thoughts,

Kind Regards, K

[extelecom]

Hello Jibes, I was wondering if you had a comparison of your "AIM Re-Bal" to a Plain Vanilla Aim account?
It appears to me that if you had one stock that was consistently down from the others you would be selling the better performers and buying the stocks that are tanking?
Just curious..

ET

[OldAIMGuy]

Thanks J.,

I'll think more on that.

Best regards, Tom

[irwin]

Thanks Jibes it seems that it is always the simple methods that work on wall street like the Dogs of the Dow or Aim .
What you are using is a form of asset allocation which is also a good method to buy low and sell high.
Irwin

[labestul]

jibes wrote Or you could try my new AIM RE-Bal method

I have reviewed the AIM RE-Bal method web pages and have a few comments and observations.

Firstly, this method is not new at all. It is discussed by Lichello.

Secondly, Bernie Goldberg gave a presentation on this type of approach at AIM 2001.

Thirdly, this approach can out perform AIMing the stocks individually but it also can significantly under perform as well. This depends on the correlations of the stocks involved. AIM derives much of its profit from volatility. The more stocks you AIM in one "basket" in general the less volatility. (AIM RE-Bal advocates AIMing several stocks, say four, and periodically re-balancing them as well as following AIM directed transactions). Great care must be taken so that the stocks used are positively correlated so as to increase volatility otherwise there will be fewer AIM directed transactions than if the stocks were AIMed individually.

One complication to this approach is the question of frequency of re-balancing in relation to frequency of actual AIM transactions. For example, one will of course always re-balance when there is an AIM directed transaction ... but ... should one also re-balance even if there was no AIM directed transaction? Thus there are two different approaches and hence two different potential flavours of AIM RE-Bal.

In order to get a fair comparison one should compare the results of AIM RE-Bal with the overall results of AIMing the stocks involved individually using the same AIM parameters. In addition both flavours of AIM RE-Bal should be presented. As the web site is fleshed out I recommend including such a comparison.

Fourthly, there is an error at the Web Site. It is stated that First, you don't use SHARES and PRICE as usual in your AIM formula

This is not usual at all. It is Market Value of the basket of securities that is used in the AIM formula as is clearly shown in Lichello's book. Of course if the basket happens to contain only one stock then SHARES and PRICE together is a mathematically equivalent way of looking at market value but this notwithstanding, it is market value that is part of the AIM formula. Of course jibes correctly employs this. The statement is only a minor error and is in fact a pedagogically sound approach to use. I only added this comment because new comers to AIM who viewed this site might have been mislead.

Barry

[karw]

Hi Jibes,

Another way to rebalance is looking at your average purchase price. Add to an equity below the avg pp and sell an equity above the avg pp.

I use synchrovest to calculate what to add and sell for some equities in the portfolio. Synchrovest uses the avg pp. Synchrovest also needs new money or "equity money". Synchrovest handles the deep diver in your portfolio very nicely.(normal amount + max half of cash). Synchrovest means some work.(weekly or monthly).
Synchrovest has 2nd gear.(turbo)

Rebalancing in equal parts does this as well, I think. Maybe Lost Cowboy could comment, rebalancing is also one of the strategies on his forum!

Regards,K