Automatic Investment Management - Robert LichelloAutomatic Investment Management is a book by Robert Lichello. In it he describes a method of investment which allows you to invest when the markets are low and withdraw when the markets are high. His calculations are a bit involved, but spreadsheets can be a big help. Comparing returns of a simple asset allocation with annual rebalancing v/s the Lichello method does not reveal a major improvement in returns over a 10 year period in the Indian stock market. Lichello's method essentially calls for a value called portfolio control, which is the amount you start your equity investment with, say for example 1000. To this value you add 10% of the portfolio value if your portfolio shows a gain. So if your portfolio is today worth 1600, you would add 160 to the original 1000 invested to give you 1160. Then deduct this 1160 from the value of your portfolio i.e. 1600 minus 1160 to give you 440. This is the amount Lichello tells you to withdraw from your investment of 1200. If you have made a loss, you would add 10% to your new (lower) value, for example, if your portfolio is today worth only 800, you would add 80 to that to give you 880. Deduct this 880 from the original investment of 1000 to get 120 which is the amount to invest afresh in your portfolio.
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