Robert Lichello (died 1996) was an American author and financial strategist best known for developing the [[Automatic Investment Management]] (AIM) system, a mechanical, rule-based strategy for managing stock portfolios. He popularized this system through his influential book, "How to Make $1,000,000 in the Stock Market Automatically!" published in 1977.
Early Life and Career
Information regarding Lichello's early life and specific career details before the publication of his book is relatively scarce. He gained prominence in the financial world primarily through his advocacy for a systematic approach to investing, rather than through traditional financial advising or institutional roles.The AIM System
Lichello's primary contribution to personal finance was the Automatic Investment Management (AIM) system. This strategy is designed to remove emotion from investing by providing a clear set of rules for buying and selling stocks within a portfolio.Key principles of the AIM system include:
- Segmented Portfolio: The portfolio is divided into a "base value" (the initial investment) and a "reserve value" (cash held for buying opportunities).
- Monitoring Portfolio Value: The investor regularly checks the current market value of their stock holdings.
- Rule-Based Transactions:
- If the portfolio's value rises by a predetermined percentage (e.g., 10% or 20%) above its base value, the investor sells enough shares to bring the portfolio back to its base value, moving the profits into the reserve.
- If the portfolio's value falls by a predetermined percentage below its base value, the investor uses funds from the reserve to buy more shares, bringing the portfolio back towards its base value.
- "Buy Low, Sell High" Mechanism: The system inherently forces the investor to buy more when prices fall and sell when prices rise, aligning with a value investing approach.
- Reinvestment: Profits from sales are held in reserve, becoming available to purchase more shares when the market dips.
The AIM system is a form of [[rebalancing]] strategy, emphasizing consistent adherence to a plan regardless of market sentiment. It is often cited as an early example of a mechanical trading system accessible to individual investors.
Legacy
Lichello's work remains relevant as an example of a disciplined, quantitative approach to investing. While the specific percentages and exact rules might be adapted by modern investors, the core idea of using predefined triggers to manage a portfolio continues to be explored in various forms of algorithmic trading and systematic investing. His book has been re-released and is still discussed among those interested in rule-based investment strategies.Bibliography
- Lichello, Robert. How to Make $1,000,000 in the Stock Market Automatically! New York: William Morrow & Company, 1977. ISBN 978-0688032338
See Also
- [[Dollar-cost averaging]]
- [[Value investing]]
- [[Portfolio rebalancing]]
- [[Algorithmic trading]]