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Lichello does not just advocate buying averaging down. HE ALSO ADVOCATES
SELLING WHEN PRICES ARE HIGHER.
So at a very high level of the stock market, when everyone is rushing in to
buy stocks, his AIM system would be telling us to sell, sell, sell.
By the time the market is at a peak, following his method (by the book or
loosely), one would have a very fat cash position.
His method also does not tell you to buy indiscriminately. (Differs from
most dollar averaging methods, which tell you to buy a fixed $ amount
periodically no matter if the stock goes up or down.)
Originally, when the stock begins to fall, there is no buy. At certain
point, when the stock goes further down, there is a buy order, only, the $
amount is very small. It is only at selling climax that one shells out a
lot more money buying....
The best thing to understand his method is to either read his book or visit
the website I posted earlier.
Regards,
Wong
ps: My main criticism of his method:
1. No market timing involved.
I would use some kind of indicators (moving average, RSI, Stochastic etc) to
find a favorable spot to get in.
2 Places no emphasis on choosing the right stocks.
In his book, he did mention that this is important, but is out of the
scope of
his book.
In order to be more successful, one needs to have:
a. fundamentally sound stocks - I would stick to blue chips type
b. stocks that are volatile enough to general trades reasonably
freqently (for example, if there are only one buy signal and one
sell signal in 2 years, then the stock is no good for AIM purposes
============================================================================
At 02:38 PM 03/22/99 -0500, The Funkhousers wrote:
>True enough, Peter, HOWEVER, as the Market declines so does the total
value of
>your total holdings, which means that in the declining market you are
>transferring ever smaller amounts of cash to the purchase of shares -- the
>values of which are continuing to decline, and this continues, ad nauseaum.
>
>This is nothing but variation of the old "dollar cost averaging" approach to
>the purchase of equities, which also has intellectual attractiveness. The
>problem is, that in the real world, none of these non-timing approaches
really
>work. As time progresses, and as the individual has to actually make and
>implement the decisions that the "system" requires, the individual fails.
>
>I have been in the investment business for more than 40 years and I have
yet to
>find a single individual who completes what they started out to do. You
may be
>the exception, but i would doubt it. There will come a time when even the
>thought of actually doing what may be THEORETICALLY required will make you
want
>to vomit. And the losses that you will, by that time, have sustained will
>drive you from the markets forever.
>
>The pitiful part is when that time does arrive, you will probably not have
the
>time left in your investment life to recover.
>
>It's too bad that these "gurus" with their practically flawed investment
>approaches can't be forced to live their lives, and their eternity, in the
>company of those individuals who have actually followed their advice.
>
>Richard D. Funkhouser
>
>PS Lichello's book is on sale at Trader's Press for $5.00. Those with a
>charitable instinct would do well to buy up the available supply, and save
the
>unwitting bargain purchaser's some grief.
>
>
>
>
>
>"Peter W. Aan" wrote:
>
>> I have been using Robert Lichello's book "How to make $1,000,000 in the
>> Stock Market Automatically" continuously since 1990, using Fidelity cash
>> reserves and several funds (mostly sector)in my Keogh account.
>>
>> The book teaches a simple allocation timing system or formula that
>> gradually moves $ from stocks to cash as your equities go up, and from cash
>> to stocks and your equities go down. Seems like a good plan for a
>> low-anxiety approach. It benefits most it your equities go through
>> numerous bull moves/bear moves.
>>
>> For several years I was out performing the indices, but in recent years I
>> have lagged behind, although my overall return has been quite good. The
>> reason for this is that the nonstop bull market of recent years has had me
>> little too little stocks and too much cash. However, when the inevitable
>> bear market comes (it will come, won't it?) then my allocation will look
>> good, and there will be lots of cash to pick up "bargains".
>
>
>
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