VAMI

Once you have calculated a number of monthly ROI results, the next analysis to focus on is the Value Added Monthly Index (VAMI). The VAMI is a way of measuring the growth of an investment over a period of time based on the ROI figures.

It does this by starting with a hypothetical $1,000. Then, each month, that figure is added to by the amount of the ROI. In this way, the results are compounded over the investment's lifetime to give a current value. As you can see in the progression of the VAMI in the calculation box on the left, each month its value is changed according to that month's ROI.

The main benefit of the VAMI is that it gives a way of standardizing comparisons between different investments (in this case, advisory services.) Everyone starts with $1,000, and from there it is relatively easy to compare the results of one service with another.

Previous VAMI x (1 + Current Rate of Return)

With enough monthly VAMI results in place, you can then start comparing yearly results. This is done by seamlessly progressing the VAMI from one year to another - the result for January simply continues on from the result in December.

As this happens, you start to obtain yearly returns. In the first year, it is the percentage change in value from the starting point of $1,000 to the VAMI's value in December. In subsequent years, it is the percentage change from the previous December's value to the current value. You can see this in the VAMI- Yearly calculation box on the left.

There is one important point to remember when using the VAMI to analyse share trading, and that is: don't think of the VAMI as if it were the result of you investing $1,000 with a particular service, because it's not. It measures the change in value of a hypothetical $1,000, based on the returns derived from trading a particular service using your trading profile, which is a combination of your original trading bank and your risk tolerance.