A.I.M. Users Bulletin Board

[SFSecurity]

Hi Toofuzzy, the by the book standard for buy and sell safe is 10% and minimum buy or sale of stock is 10% of the stock value on hand, which, for practical purposes is the same as the % of the number of stocks on hand, As Is7550 quoted from the Fourth Edition on page 263

Make your minimum purchase or sale 10 percent of your Stock Value. Another way to look at it is this: The amount you insert in your AIM-HI Action column must be at least equal to your Safe figure. Thus if your Stock Value is $2,000 your Safe figure would be $200. And the MINIMUM figure in your Action column must be at least that much: $200. Otherwise, just insert a zero in the Action column.

For goofs and grins I looked it up in the oldest version I have, a 1980 edition. The concept of a minimal buy/sell is only based on a 10% of stock value being subtracted from AIM's advice about the dollar amount to either buy or sell to get the correct number in dollars. See pages 39-40 of October 1980 Revised and Updated version, also look at the spreadsheet on page 59 and watch the Safe column as it goes up and down.

To continue, I looked at my copy of the 3rd edition. On page 45 it says:

Column number 2 on your record sheet is the SAFE column (Stock Adjustment Factor Equalizer). Safe is a figure representing 10 percent of your STOCK VALUE.

So it seems that the by the book figure is actually 10%, not 5%, and was through all the versions of the book.

The way I see it is that somewhere in fog of time someone figured out that 5% was a better choice once the move was made to a split buy and sell SAFE. The old way, before the split, generated a buy or sell when the move was a bit over 10% but this would lead to some small, expensive trades. Having a minimum size buy/sell helps keep trade cost low, thereby improving rate of return.

Best,

Allen