Hello Bernie, I found your note interesting so decided to run a few histories through Automatic Investor with your stocks. The period is Jan. 3, 2000 to Dec. 29, 2000.
Since I didn't know your positions as of Jan. 3, 2000, I decided to use $10,000 with an average commission of $10 for each stock.
I checked each stock using daily, weekly and monthly updates. Configuration parameters were set to 10/10 with 5% minimum trade and 50% initial cash.
Here are the results:
AC daily: 34% weekly: 31% monthly: 19%
CEI: 17% 15% 17%
FLC: 43% 41% 39%
MRK: 22% 17% 14%
HR: 23% 19% 16%
HRP: -1% -3% -4%
XLF: 15% 15% 14%
UOPIX: -68% -58% -51%
I found that in every case except for UOPIX, updating more frequently gave better results (although CEI daily and monthly updates were the same).
That got me thinking that perhaps if a stock's return was wildly negative, a monthly update would be better. So I tried
GAC.TO -88% -81% -78%
YHOO -84% -79% -61%
AMZN -76% -68% -62%
Then I thought I'd try a few blue chips,
IBM -14% -13% -13%
GE -1% -1% 5%
MSFT -53% -49% -38%
Finally I threw in a VERY speculative stock that has excellent AIM characteristics
SVSY 16% 25% 23%
Keep in mind that this was not a scientific test, but was meant to "get a feel" for how the different update periods affect returns.
My feeling up until I ran SVSY was that if an AIMed stock was expected to have negative returns for the period, it would be better to update monthly. However if it was expected to have positive returns a daily update was better. I then started thinking that we could use the IW to determine the update period -- when the IW was low risk, switch to daily updates, when it was high risk use monthly updates, Medium risk: use weekly updates.
Unfortunately I ran SVSY through Automatic Investor and it didn't give results consistent with the theory. What's more is that I think SVSY has the characteristics of an excellent AIM stock. Try running it through AI for practically any period and it beats B&H handily (e.g. from 1/1/98 to 1/5/01 the return was 242% compared to B&H's 17%). (Still, I think switching update periods based on the IW may have merit.)
My feeling after all of this is that more frequent updates over the long term will give better returns, but over the short term, who knows?
regards,
mark. |
