Q......Portfolio Control Additions
Hello Tom,
I'd like to thank you for the information you have put on
your AIM website. I became aware of Mr. Lichello and his
investment procedure last February when I was reading a
small book on investing that I got thru my local bank. They
didn't really explain AIM's internal workings but very
clearly showed the downside of fully investing when prices
tend to go down. At the time I was leaning to short term
trading, trying to make use of the numerous but small
ripples of the market. But eventually I realized that that
would eat up a lot of commission costs. Even though my bank
only asks 0.4 percent on any transaction. Small profits are
eaten up by frequent commissions. As I am a fairly poor
investor (25 yrs old dutch college student that was about
to move at the time) I didn't really like that idea. And
also since I am very new in investment I didn't know when
was the right time to make a buy or sell. So AIM was
introduced to me right on time, before I could make a
stupid mistake.
As of yet I still haven't started my AIM account. Due to
moving I had to spend quite a lot of my savings. So I used
the time to get some extra money and take the time to
analyse AIM's internals. I expected to start around this
time, but considering the current situation I'm not so sure
about imminent market recovery. I considered tech
mutual funds my favourite, thinking it's part of the economy
here to stay. But maybe I have to reconsider that.
(side note: since my banks tech mutual funds are heavily
oriented to the US tech market, do you think the idiot wave
has any credibility for it. I don't really know which
companies it is invested in, but I'm sure I could find out
the most important ones.)
Anyway, I'm really writting because I did some heavy
thinking on AIM's purchasing. And specifically on the PC
addition. I have read people asking if it wasn't more
appropriate to add the full 100% of their order to PC. I
believe it's the wrong thing to do. In effect one is
keeping the next buy price at almost the same level as the
last one. No cheaper buys.
Let me try to clarify:
AIM buying principle says PC must be equal to
share_value + minimal_order + SAFE before any purchasing is
done. As we have made the transaction, and assume the
price hasn't changed, then the minimal_order has been
converted into shares bringing the share_value up to the
level of (PC-SAFE). (SAFE number before buy)
When we forget to add the addition to PC, the stock price
has to drop only to cover the minimal order price, not
SAFE. (well, ok, a tiny bit, 5% of 10% of last sharevalue)
So the shareprice will be about 5% lower. (Mr. Lichello
suggested that, I believe)
If one does add to PC, say 50% of the order as Mr. Lichello
says, PC will be higher and so share_value doesn't have to
drop the full amount (5%), but only approximately 2.5%
before the next buy is ordered.
If 100% of the order is added to PC then the dead_zone
created by the minimal order size is practically bypassed.
Buying will be triggered almost immediately. Meaning no
cheaper buys. AIM will consider that an insult to it's
cash reserve.
<end of clarification>
Perhaps you will want to put this on the message board. I
seem to be unable to register from my college internet
connection here. For some reason SI doesn't see I have
cookies enabled. (btw, I'm studying aeronautical
engineering, so I know all about the feedback loop stuff.
Control systems being one of my favourite subjects)
Keep up the good work on the website. Real work of art. And
immense source of information :)
Sincerely,
Rico
The Netherlands
p.s. Am I that 2% website usage country specific from the Netherlands?
----------------------------------------------------------
A.......
Hi RJ,
I'll make sure to add your comments to the AIM Q&A thread
on SI. Thanks for your considered opinion. Knowing how
closed-loop controllers work makes understanding AIM a lot
easier. The brilliance of Mr. Lichello's "positive
feedback" isn't immediately apparent and in most industrial
or commercial machines would be disaster!
I would think that a general "tech fund" would be a great
place to get started with AIM. If it is more than 50%
invested in US technology companies I'd feel comfortable
with using the Idiot Wave's current cash reserve
suggestions for Stocks as the basis for your starting
point. The "Diversified Mutual Fund" cash setting is
probably too low unless you did something else to
compensate for the rather large price range of most tech
sector funds.
You may, in fact, be the 2% of readership showing from The
Netherlands! However, that would mean that you would have
DownLoaded over 15,000,000 bytes of information from my Web Site in August!
I do thank you for the kind note and the effort you are
expending on getting "up to speed" with AIM. If there's
anything I can do to help, please don't hesitate to ask.
Many people have been having trouble registering with
Silicon Investor. I don't really understand what the
problem is, but they have reduced staff at SI and many
things seem to not get repaired as quickly as a couple of
years ago!
Best regards,
Tom Veale |
