Example of Constant Value Investing

Here is an example of constant value investing, as applied to Amazon.com (AMZN) yearly prices. The prices were obtained from Barchart.com, which is on my list of links.

Constant value is the basic principle behind my successful stock trading system, which I describe in my book, Stock Trading Riches, which is available on Amazon.com.

To show an example of how constant value investing self-corrects a case of bad timing, we will start with January 2000, at the peak of the internet bubble.

Here, then, are the yearly January 31 closing prices:

2000	64.56
2001	17.31
2002	14.19
2003	21.85
2004	50.40
2005	43.22
2006	44.82

Now, let us pretend that we bought $2000 worth of AMZN at the end of January, 2000 (ouch!). Then, we rebalanced back to $2000 at the end of each January by dividing 2000 by the current share price, to find out how many shares we need to own. We added new cash for purchases when necessary.

Here is the table:

price	shares	cash pool	total value	amount invested
64.56	30	63.2	2000	2000
17.31	115	0	1990.65	3408.15
14.19	140	0	1986.6	3762.9
21.85	91	1070.65	3059	3762.9
50.40	39	3691.45	5657.05	3762.9
43.22	46	3388.91	5377.03	3762.9
44.82	44	3478.55	5450.63	3762.9

At the end of January 2006, we had invested $3762.90 and had a total value (stock plus cash) of $5450.63. This is +44.85%

Buy and hold, on the other hand, would be down 30.5% (44.82/64.56)