Posted by GL - ON on August 17, 2003 at 21:41:33:
Here is the web site of an ordinary investor named Tom Veale who has been using AIM since 1988. He has some interesting ideas and experience with Lichello’s work.
There is another site called Newport Software that can supply a program to do the monthly calculations if you can’t stand to do it manually.
I never knew either of these guys existed until this afternoon. I have known about Lichello’s work since the 70’s but up until now I never checked it out on the internet. I did a Google search for Robert Lichello and got 451 results.
You can also get the book that started it all from Amazon and check it out for yourself.
The 16% Solution by Moskowitz - Posted by Robert Campbell
Posted by Robert Campbell on August 17, 2003 at 12:34:19:
As evidenced by the Amazon.com sales rankings, the book on tax lien investing by Moskowitz (The 16% Solution) that was written in 1994 continues to be a best seller.
In reading some of the reviews, it was mentioned that 16% returns are no longer readily available. Since the Moskowitz book was published - and this lucrative area of investment was widely exposed to the general public - competition (institutional and private) has driven yields down to single digets.
In fact, one reviewer said 4% was more like it today, not 16%, for the majority of tax lien investors.
Can anyone verify or refute this observation?
Second question for comments …
If an investor knew a tested stock market timing system (using no-load, S&P 500 Index funds) that has yielded 14.8% annual returns since 1954, would most investors consider this to be a more attractive alternative to investing in tax liens?
The buy and hold method of stock market investing (no timing) has yield a 12% return since 1954. Compound this 2 to 3 percent advantage over the course of 50 years and you’ll see why “compounding” in the 8th Wonder of the World.
Interestingly, you rarely hear about timing the stock market with no-load mutual funds because no one has a vested interest in telling you about it.
I’d be grateful for insightful comments.
Re: The 16% Solution by Moskowitz - Posted by Mike
Posted by Mike on August 18, 2003 at 01:51:40:
I’ve been buying tax lien certificates in Louisiana (my home state) for about 3 years. The competition has gotten a little more intense but not much. Louisiana is not a particularly good state for tax liens (we have a 3 year redemption period and an additional 2 years if the owner gets an attorney). I get 17% the first year and one per cent each month afterwards. Louisiana is a “bid down the ownership” state instead of a “bid down the interest” state; so the amount of interest earned on a redeemed TLC is never in question.
It’s been a pretty good investment vehicle for me (about 90% of my TLC’s have been redeemed within the first 15 months). There has been a lot of ‘hype’ from the gurus on tax liens and deeds…they usually show homes bought for pennies on the dollar. They may be out there but I’ve never seen them…Most of the properties here that are not redeemed within the 5 yr period are in the middle of BFE…not worthless but almost…
Good luck and happy investing!!
Mike in Louisiana
Re: The 16% Solution by Moskowitz - Posted by rm
Posted by rm on August 17, 2003 at 17:01:32:
>>The buy and hold method of stock market investing (no timing) has yield a 12% return since 1954. Compound this 2 to 3 percent advantage over the course of 50 years and you’ll see why “compounding” in the 8th Wonder of the World.>>
This rate of return only holds in a vacuum.
Who buys and holds, anyway?
The average investor buys high and sells low. The market’s up a healty percentage this year, and where’s the average investor? On the sidelines.
And, even for those who think they buy and hold (via mutual funds), those portfolios are churned at a 50-100%+ rate per year.
Systems sell books, tapes and seminars, but rarely yield the results promised… mostly because the end users don’t follow them.
Re: tax sales- they’ve completely revamped the system in MI. What used to be a 16% yield in the first year and 50% in the second is now a non-redemption tax sale.
The only exception I’ve seen is a court-ordered redemption period of unspecified duration on a vacant, commercial parcel.
Re: The 16% Solution by Moskowitz - Posted by John V, FL
Posted by John V, FL on August 17, 2003 at 15:30:52:
Robert, down here in Florida the institutions bid the bigger items down under 1% usually targeting improved properties with bank mortgages and they are not even compounding yearly. To answer your question yes I strongly feel (as someone who has worked all these angles for years) it is far superior and safer to time the market via an index fund versus investing in tax liens (or long term stock market investing or leveraging real estate at the top of a cycle). Instead so many got burned by tech stocks and mutual funds they will not trust the stock market in any form until they get burned somewhere else. Now way too much capital has come our way in all apsects of real estate ivnestment that much of the fun and profits is taken out.
Robert I’m up 125% year to date on my Etrade account swing trading stocks, which sure beats tax liens! Once you get good at it you are in complete control and can invest as much as you want quickly (keeping all your cash constantly working) as your net worth grows without working any harder to generate extraordinary returns though it is not nearly as safe as index fund timing and based much more on the skill of the manager/investor .
Re: The 16% Solution by Moskowitz - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 17, 2003 at 14:34:10:
In AZ most certificate were selling at about 8% last that I knew. Similar reports for other states. The big wall street firms send people to buy as many certificates as they can.
I suspect that in less populous counties one might do better.
Have you read “Value Investing in Real Estate” by Gary W. Eldred? hE says that there is no good research on the rates of return people make in the stock market. All the studies that are cited are just theoretical figures assuming you buy and hold without paying taxes, no cost for reininvestment, etc.
He himself does not provide a solid figure, but estimates that the real rate of return is probably more like 7%.
I have no comment on noload mutual funds as an investment. I find that real estate provides godd enough returns for me. WIth more control.
Good InvestingRon Starr*
Re: The 16% Solution by Moskowitz - Posted by GL - ON
Posted by GL - ON on August 17, 2003 at 13:36:42:
Have you looked into the AIM system of Robert Lichello’s? It allows the buy and hold investor to significantly increase his returns while reducing his risk.
It doesn’t involve trying to time or second guess the market either.
Do a Google search for Robert Lichello or buy his book from Amazon.
The 16% Solution by Moskowitz - Posted by Robert Campbell
Posted by Robert Campbell on August 17, 2003 at 15:56:47:
You, my good man, apprear to clearly qualify as a skilled, objective decision maker.
Many people believe you have no control in the stock market as compared to real estate investing.
You and I both know that’s not true. You have complete contol. You can’t control the direction of the market … buy you can control when you buy and sell … and that’s a skill that can be learned - as you have proven with your swing trading method.
John, I’m sure that you speak from experience and I wish you continued success in all investment markets!
Re: The 16% Solution by Moskowitz - Posted by Robert Campbell
Posted by Robert Campbell on August 17, 2003 at 15:07:13:
I don’t know where Gary Eldred gets his stock market information, but if what you say is true about his comments on long-term returns, he’s terribly misinformed.
But don’t get me wrong about Mr. Eldred, or anyone else for that matter. Erroneous, untested, and unsupported statements have always dominated the markets.
In my book, if a person can’t provide evidence to prove a point or support an investment idea, a person is relying more on Dark Age mysticism than on scientific reasoning.
Like you, I like real estate investing … especially when prices are depressed at market cycle bottoms.
For retirement accounts, however, most savers have their money in the stock market. Therefore, if you can improve on the buy and hold strategy by a percent or two or three – and lower risk (and worry) at the same time – a tested and proven timing strategy with a no-load mutual fund would benefit them greatly.
Best wishes, Ron. I always enjoy your comments.
My comments on the AIM system … - Posted by Robert M. Campbell
Posted by Robert M. Campbell on August 17, 2003 at 15:19:48:
Good, average, or bad, the biggest problem I have with the AIM system is that it is way too difficult for the average person to follow.
That’s why I like simple systems that not only beat the market averages - which 80% of all mutual funds do not do! - but also because John and Mary Q. Public can understand a simple system and put it into practice.
Thanks for the post Gil. I always enjoy reading your comments. You are well-ground in your decision-making, which puts you in an elite group of individuals.
Re: The 16% Solution by Moskowitz - Posted by John V, FL
Posted by John V, FL on August 18, 2003 at 11:28:21:
Robert in the long haul superior performance and returns on any investment is based on your drive, desire and knowledge. In the short run being in the right place at the right time works too.
Re: My comments on the AIM system --R.E.??.. - Posted by Willie
Posted by Willie on August 18, 2003 at 05:51:09:
What does this have to do with Real Estate? Under the rules, this site is for Real Estate, not for the Stock Market. These should be removed.
Re: My comments on the AIM system … - Posted by GL - ON
Posted by GL - ON on August 17, 2003 at 17:38:15:
I’m not sure what you mean by hard to follow. What part of “buy more when it’s cheap, less when it’s dear for a low average cost” don’t you get? There are ordinary people using the AIM system to double, or triple their average returns, with lowered risk, while buying the same mutual funds or stocks they always did.
The math is pretty simple, it requires only a minute’s work with a calculator once a month.
You are correct that 80% of mutual funds underperform the S&P. You do not mention that in a list of the top performing funds, you seldom see the same fund 2 years in a row. So why bother trying to pick the fund that will do best in future? And we already know that for the average person, stock picking is an exercise in futility.
If I were doing it I would chose a mutual fund family that allows switching between individual funds without cost, and I would put my money into a stock fund that mimics the S&P and a money market fund or short term bond fund, and move the money from one to the other once a month as called for by AIM.
My approach to the markets … - Posted by Robert Campbell
Posted by Robert Campbell on August 18, 2003 at 13:08:37:
To put the odds in my favor - in addition to market knowledge - I am a firm believer in a systems approach to investing.
- Be your own guru.
- Analyze key data that gives you an advantage in the market.
- Understand market psychology.
- Create a strategy that utilizes your market advantage.
- Discipline yourself to play your advantage over and over again.
Getting rich is not easy. With a market advantage and compound growth wsorking for you - and let’s not overlook a little luck - practically anyone can accumulate a million dollar net worth.
Re: My comments on the AIM system … - Posted by ScottS
Posted by ScottS on August 17, 2003 at 21:45:36:
GL and Robert,
I am not sure if you know of a guy name Ken Long who has a website called tortisecapital.com. He actually teaches an approach very similar to the one you descri be at some events with Van Tharp and John Burley.
Check it out if you haven’t yet.
For the record, I have no affiliation with Ken other then we have a few things in common and I admire the fact that he is career military (albeit an officer but I won’t hold that against him).
Re: My comments on the AIM system … - Posted by Robert Campbell
Posted by Robert Campbell on August 17, 2003 at 19:52:51:
You say that “ordinary people” use the AIM system to double or triple their average returns with lowered risk.
If this is true, I know a lot of people who are interested in knowing about it.
Please show me where I can find time-tested evidence that the AIM system can consistently produce these kind of spectacular returns.
Re: My comments on the AIM system … - Posted by GL-ON
Posted by GL-ON on August 17, 2003 at 23:21:47:
Here is a comparison of AIM vs Buy and Hold, for 2 years of the 30 Dow Jones stocks. AIM did much better, in some cases changed a loss to a profit, in others increasing returns 300% or 400%.