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Strategies & Market Trends : A.I.M Users Group Bulletin Board

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To: Skipperr who wrote (6333)	12/1/1998 3:08:00 PM
From: JZGalt	Read Replies (1) of 18928

> I guess the thing that bothers me is William O'Neill's advice to > never average down on a stock - but that is the way AIM buys low! O'Neill's advice is geared more opportunity cost vs. anything else. If you average down and it takes time for the stock to recover, then you would have been better off finding the next stock that is going up vs. waiting for the first stock to recover (in most cases). AIM makes the assumption that the stock will recover and that if you buy more a lower prices, you will be ahead in the long run. It is a conservative approach and probably does not maximize the overall profits although this thread has clearly demonstrated that it will work better than the buy and hold method for highly volatile stocks or stocks which trade in a trading range. In comparing O'Neill's approach and AIM, you are really comparing apples and oranges. O'Neill's methodology makes money from moving from one stock to another. AIM is geared more toward maximizing the outcome once you have decided on a stock. These are really different things. I never cared for O'Neill's approach since I had to: a. find the stock b. buy it at the right price c. sell it at the right price d. repeat a,b,c Personally I do find with a and b, and have trouble with c. AIM might solve some of that problem but I haven't yet employed it in a real life situation. > Stock selection is also very important. Probably the most important aspect of AIM and other "trading" methods (see step a. above). A friend of mine is working on a website where he uses various technical and fundamental aspects to select 1-2 stocks per month with the objective of holding them for 1 year or more. Looks good so far when I've done some back testing. Selections might be suitable for AIMing with some variations because they rely on selecting stock which have a 5 year eps growth rate > 25% as one of the base criteria. This suits AIM since the company has a track record and that is good right off the bat. I ran a screen the other night with a beta > 1.5 and you immediately moved for a universe of all stocks right down to 49 stocks to consider. That is manageable. In any case there are many many ways of making money in the stock market. It all depends on what you can tolerate and the time and effort you can spend on the approach. The easiest method for me is to find a few good stocks and hold them for a very very long time coupled with a little bit of technology stocks thrown in to up the averages. Works for me. Your mileage may vary. ----- Dave

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