A.I.M. Users Bulletin Board

[ls7550]

To all the forum members I apologize for bringing this method up since this forum is dedicated to AIM

Hi Ray. Robert Lichello started off by suggesting AIM be used to manage a portfolio of stocks/funds, stating that running out of cash periodically was a good thing as you wanted to be more heavily/all in during the dips, replenishing reserves during peaks. i.e. primarily as overall market timing (add low/reduce-high).

Within that portfolio he said that you were free to change holdings whenever you desired, provided that you kept to around what AIM was suggesting as being appropriate overall stock value/exposure.

As such, constant value or suchlike is just as valid for AIM as others and no apologies are required IMO.

AIM'ing a portfolio comprised of low and high beta assets/choices will have one appropriate choice to add to/reduce as/when AIM indicates to buy/sell. But AIM leaves that to the investor to decide for themselves. Similarly at times you might decide to rotate some amounts between holdings despite there being no current AIM trade signal. If a high beta is up a lot, low beta relatively lagging, but there's no AIM sell/reduce trade being indicated its perfectly valid to sell perhaps $1000 of the higher beta and add that to the lower beta.

Originally Lichello didn't specify a minimum trade amount other than saying less than $100 was too little/expensive to trade (on something like a $5000 example stock value amount). In present day terms I'd guess that would be comparable to around a $1000 minimum trade amount. From my own observations no less than 10% of stock value minimum trade size is appropriate if you're reviewing monthly, however 5% of stock value minimum trade size is more appropriate if you're reviewing quarterly.

Catching the larger market cycles (larger amounts traded less frequently) can be as productive as individual AIM'ing and trading relatively small amounts relatively frequently. Of the two the former is more trade costs friendly.

For the retired he proposed that instead of more aggressive growth assets being AIM'd (using AIM-HI) that more stable value i.e. combined stock/bond funds be used instead. If for instance you AIM-HI a 60/40 stock/bond fund then that's akin to a initial 80% x 60 = 48% stock (leaving 52% bonds) holding i.e. close to a 50/50 stock/bond blend. But where part of the move to/from bonds (cash) over time is indicated by AIM and part is defined by the fund manager.

For accumulators, 80% in more speculative (stocks), 20% cash means you're starting off with 25% of stock value available in cash reserves. If share prices drop then proportionately cash reserves increase relative to the lower amount of stock value. Dividends and cash interest added to the cash reserves increases that further.

From prior backtests I've made AIM-HI started from a relative low (with hindsight) kept up quite closely with 100% buy and hold. Started from a relative high and AIM-HI bettered 100% buy and hold. Extend out long enough and multiple cycles typically has AIM win out overall.

Clive.