Vic-

Whether you use PCA, Newport, an Excel spreadsheet or something of your
own creation, the AIM algorithm (assuming it's mechanized properly) is
the same. AIM does work, but you have to have deep pockets to handle the
down cycles (when you have to do all the buying) that go with averaging
down.

AIM is nothing more than a money management scheme... a way of keeping
you from buying too soon and forcing you to sell some shares on the way
up to rebuild capital. PCA automates that scheme. If you've read
Lichello's book, you know that.

What Lichello leaves out, of course, is what sort of securities work
best. I suspect because he envisioned trading a basket of stocks.
However, the popular way to use AIM has become trading a single security
in each AIM account. What that security has to have is volatility; with
that plus enough enough time and capital you're going to make money. If
the usual swing from mid-term high to mid-term low is greater than about
25%, you'll make $$$. AIM is not a get-rich-quick scheme... more of a
get-rich-slow approach.

Typically volatility is measured by Beta. The higher the beta, the more
cycles and/or bigger swings you'll have between the mid-term highs and
mid-term lows relative to the S&P 500. Typically the best you can hope
for is maybe 6 or 8 trades per year if you catch the highest high and
the lowest low.

Now, if you can choose a stock with a high Beta *and* an Alpha that is
positive, then you'll be trading a security that has significant swings
between mid-term highs & lows and is generally trending up relative to
the S&P 500. When you have a stock trending up, that's when you can
expand on the basic AIM approach and start adjusting AIM Control. But
that's getting into sophisticated modifications that can end up costing
yoy major $$$ if you screw up.

Beta is available from several sources (data from Worden Brothers for
instance), but alpha is harder to come by. I calculated it myself years
ago using weekly data, but I no longer have the right combination of s/w
and data to be able to do that. Since Alpha & Beta are measures used in
trading options, perhaps some options site has something, but I've never
made an effort. Most important, if you're going to use a scheme that
requires you to average-down, you better have a *lot* of confidence in
the underlying security! If you trade stocks, one of the sources for
making that determination is Trend Line, but there are many to choose
from.

If you want to learn more about using AIM (independent of the software
used to keep track of buys and sells), find Tom Veale's web site. He's
the master. Here's an article about Tom:

http://www.automaticinvestor.com/articles/TVInterview.html

and here's his web site:

http://www.aim-users.com/

Tom is a really good guy that has a passion for teaching folks about
AIM. He makes his living exclusively from trading with AIM (including
putting 2 daughters thru college). About 5 years ago I think he told me
(my memory sucks, so you'll have to ask him yourself) that he's average
over 20% per year since 1988.

Bruce Bowman
Santa Fe, NM




> Tarkus, I can't answer you question, but can I ask you one back? I
> have
> an old version of PCA, and well, I gave up using it because I just
> wasn't doing well, maybe it was my way of doing things wrong, or
> whatever, but, how do you like it? I mean have you done OK with your
> portfolio, have you done well with PCA? Where do you get your stock
> listing or source from?