Hi Larry, That pretty well covers the way I'm doing things. There are others here that run both shorter and longer periods of review, but we all are generally using the same franchise - AIM.
Regarding the "Why" of frequency, it's a matter of experience. Both with the industrial sector and with AIM. Stocks seriously influenced by the interest rate cycle move in conjunction with the long bond. That cycle is probably a full three years average length. There's just no reason to move quickly when involved with such a long sine wave.
Stocks which attract momentum players tend to have very short and not terribly predictable patterns. These probably will benefit from a shorter time frame of renewing the orders.
Over time, it hardly matters much. AIM will take care of us and our follies!
I do accelerate my Sell order replacements when my cash reserves are very low. I like to get back to a comfort level of purchasing power quickly after a market crunch. Here I'll break my own rules on how often I replace a filled Sell order.
You'll get a feel for this over time. The biggest mistake most AIMers make is in not understanding what Mr. Lichello means when he talks about "Pumping the Brakes." If there's been a rapid decline in price/share, AIM might tell us to buy 250 shares of our favorite stock. We do that and AIM will tell us to go ahead and buy an extra 100 shares at the same price. This happens because we've raised the Portfolio Control with the first purchase. Mr. Lichello expected us to wait a month before "doing the math" again. This was the time delay he felt was appropriate back in 1977. However, with the software we use today, we get that next buy signal immediately after entering the results of the first order.
This leads many new AIM users to think that they need to satisfy AIM's every request on the Buy side. We don't and many times we benefit from the delay of a week, two weeks or whatever period we have chosen. If the trend is DOWN, then we'll probably buy more efficiently in a week or two.
We don't experience this bit of hyperactivity on the SELL side because no change in Portfolio control happens. We sell at a price and we're done. In the buy mode, it's proper and as Mr. L anticipated efficient to hesitate between pulses of the brakes so we don't burn our cash too rapidly.
For several years I ran my accounts on a monthly basis. I then switched to bi-weekly. My current software I update on a weekly basis and for most stocks renew my GTC orders weekly. There are those stocks that just do better with a longer time horizon, however. Capital Equipment company stocks come immediately to mind. They usually are at the very tail end of any economic cycle to which they respond and have very long periods themselves. So, why hurry them?
You see? Your questions give me a chance to spout off!! This is good for me, at least, and maybe helps others!! Thanks.
Best regards, Tom |
