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Author: lostcowboy1 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 727  
Subject: Re: adding cash to AIM Date: 1/31/2002 5:54 AM
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Hi Reccles4, You should be aware that Mr. Lichello did write another financal book, Super Power Investing. In that book he writes about a investing methed called Synchrovest, that was made for systematic investing. I posted a thread here on it, around post 47 I thank. on the last message I posted a link to msn message boards where I had posted several spread sheets. Here is that link.
http://communities.msn.com/StartInvesting/general.msnw?action=get_message&mview=0&ID_Message=52857&LastModified=4675340642210980958

I will try to desribe how Synchrovest works, in case you or someone else, has only pencil and paper. This will seem a lot like Twinvest, but Synchrovest came first. Mr. Lichello striped Synchrovest of its better qualitys to make Twinvest. IMHO

First decide how much you can invest each time. You then invest 3/4ths in stock and keep the rest in cash, just like Twinvest. Instead of a Twinvest code,you keep track of average cost. Next investment period, you take the old average cost and divide it by the new stock price. This new number he called his multiplyer, it would be multiplyed with your (3/4th investment) to form your final investment. However If the multiplyer was larger than one he wanted you to do one more thing, subtract one from the multiplyer, so you are only using the fraction. you would multiply this with your cash, to come up with the secund part of your final investment. The next time period you do this all over. Just as with Twinvest, Mr Lichello thought there was a time to be invested and a time to cash in your winnings, This was at 100% profit on your money. The stock itself may have tripled, while you were making that 100%. Here is when it gets exciting and sexy.lol! With Twinvest you do not have a way to reinvest that money you just got, with Synchrovest you do! And just like Aim , Synchrovest will be investing most near the low of the market, how ever just like AIM Synchrovest can use up all your ready cash.As a matter of fact Synchrovest will use up your ready cash faster than AIM!
Just like everyone else, I like to tweek on Mr. Lichello's programs. I came up with two for Synchrovest. One is never Invest more than half your ready cash at any one time, If you thank about it this is a good Ideal. Mr Lichello, liked to justify the titles of his books, with a demo stock chart, In super Power Investing he used this sequnce of numbers, 10,11,12,13,14,15,14,13,12,11,10,9,8,7,6,5,6,7,8,9,10, and Synchrovest looks very good compared with Dollar cost averaging, thats why he wrote the book. But I had just made my spreadsheet and wanted to go up againest AIM, how good would it do? So I plugged in the numbers for the $10,000 to $1,000,000 chart, How did Synchrovest do? Not very well! But when I looked closer I found out that my spreadsheet had not made one sell! Well I checked it for errors, and found none, so I sadly put it away for a while, I had really expected much better. About half a year later I was rereading Mr Lichello's book How to make a $1,000,000, and beleive it or not had just got to the part about the old licene plate when it hit me! Mr Lichello had made the same mistake with Synchrovest! He was selling two high! you should not sell at 100% profit but at 50% profit. I quickly changed the spreadsheet, and reran the chart. Have you ever seen anything come close to AIM on that chart, I never had, but I did that day! Well I stopped and rechecked everything again. I even used pencil and paper, to verfiy the first two cycles, they matched. AIM had a $10,000 lead, And Synchrovest with just a $100 a month Investment came up from behind, How close did he get by the eighth year,seventh month? I am not going to tell you, you would not beleive me! I will only say that the word Close does not cover what Synchrovest did that day. Now you can do one of two things, say what a good story that was, or go to that link and download that spreadsheet and test it your self, or if you have no spreadsheet program (Excel), you can do it by hand. Here is where that thriteen colunm table comes in handy. I'll start you off. Stock price 10,8,5,4,5,8 and repeat.
Planned Investment is $100 * 3/4ths, we don't have a multiplyer yet, so we invest $75 at a stock price of $10,buy 7.5 shares and put $25 in ready cash. $75 divided by 7.5 shares give us a average cost of $10 a share. Next month the price is $8. The first thing we do is take average cost and divide it by the new share price, we get 1.25. 1.25 times $75 equals $93.75, but the multipler is larger than one, so we subtract one from it to get a new multiplyer, .25. .25 times ready cash($25) equals $6.25,add it to $93.75 and you get $100 invested at $8 a share, you buy 12.5 shares. Next month you take total amount invested in stock, and divide it by total number of shares, you get Average Cost of $8.75. Divide $8.75 by the new stock price of to get the new multiplyer 1.75. 1.75 time $75 equals $1.31, there is no need to do the secund multiplyer as we have already maxed out, We only have a total of $125 that we can invest at this time! Mr. Lichello says only invest what you have on hand, no reaching into the kids piggybank. We buy 25 shares for a total of 45 shares. the next month we have a total cost of $300 divided by 45 shares for a average cost of $6.67. Divide that by the new stock price of $4 to get 1.67. Multiply that with $75 for $125 to invest, but we don't have it so we invest $100. At $4 a share we get 25 shares for a total of 70 shares. We have invested $400, divided by 70 shares for a average cost of $5.71, not bad at all. Next month the price goes up, about time! $5.71 divided by $5 gets 1.14. 1.14 times $75 gets $85.5, we could take .14 times ?, cash on hand is zero so I don't do it, you could take 1.4 times $14.5, but in this spreadsheet I did not do it. So $85.5 invested at $5 gets 17.14 shares for a total of 87.14 shares, plus we put $14.5 in to ready cash. We have a total investment of $485.71 invested in 87.14 shares for a average cost of $5.57. Next month the stock rises again to $8 a share, we all shout we're in the money. $5.57 divided by $8 equals .7. .7 times $75 is $52.5. $52.5 divided by $8 is 6.53 shares for a total of 93.67 shares. we have invested a total of $537.97 divided by 93.67 for a average share of $5.74, humm we barly moved average cost. now in my spreadsheet I keep a running total of total profit. Here is how I do it (total number of shares times current Stock Price minnus Total Cost divided by total cost) at $8 we have a profit of 43.53%, we could sell now but we are greedy. So we wait, next month the stock hits $10. average cost $5.57 divided by $10 is .56. $75 times .56 is $42 to invest, and $58 to go to ready cash, but wait before we buy stock lets see if our total profit went over 50%, our sell point. Yes it did 74.13%, lets sell! we sell, 89.37 shares, our ready cash is now at $1055.71 and we have 4.31 shares remaining. we are done for this month, except we need to raise average cost to $10.00. What I did here was keep the amount of shares I was getting ready to buy, I saved a commision. WE now have lots of cash, Mr Lichello say's that after the first sell to use your full monthly investment as you now have the cash. My spreadsheet is not setup for that. My spread sheet is not setup for investing. what it is set up for is so you can change things and see what effect it has on your profits.
Here is what I see, it is very important to sell during each cycle. It is less important to sell at the top of the cycle as we just did. I put in stock prices to sumulate a bear market with several rallys, in order to catch the rallys you had to lower the sell point to 30%. My spreadsheet is free for anyone to use, or change. If you decide to make a sellable program, that used parts of my spreadsheet. I think it would be nice to give me a free copy.
I personaly have not invested using Synchrovest. Being disabled I have no cash that I can risk in the stock market right now. But if I did I would start with Synchrovest, as it fits systematic investing very well. It Beats Dollar cost averaging from the get go, it beats Twinvest after the first sell point, it beats value cost averaging (I don't think I set up my VCA spreadsheet by the book), and yes it apears to give AIM a chalange. I feel it is worth everyones time to give it a try.
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