Hi Allen, Re: AAII and SPY Performance since 2003............
As about 90% of mutual fund managers will tell you, its very hard to beat the indexes consistently. When you mention "running AIM" I assume you applied AIM to the SPY. AIM, to be effective at all requires some of the total asset base be set aside in the form of cash. That cash average percentage is going to dilute total return in a rising market when using the same investment unless it has been put to productive use several times during the test period.
The higher the total cash average over the test period, the more difficult it will be to out-perform. I think this explains the various incantations of AIM from Mr. Lichello over the AIM book's span of time. It also helps to explain why many have worked hard on cash management relative to AIM. Some use other vehicles than money market funds for their cash to gain a bit of value while those dollars are 'resting.' Some limit the build-up of cash within the AIM system. Some pool the cash and use diversified portfolios of non-correlated investments. Some seek to understand how hard AIM works on the "invested" side and disregard the non-performance of the cash side.
If you own a home in Tornado Alley for 20 years and don't buy any insurance on it, you make the most 'total return' on the house when you sell. This assumes that there have been no tornadoes during that 20 year span. You are a Buy and Hold home investor. The same could be said for buying health insurance. You would be far richer after 40 years if you never spent anything on health insurance and you had no health issues during that time.
So, how much insurance did the AAII portfolio carry over the time frame? How much insurance did the SPY carry over the same time frame? How much cash insurance did AIM carry?
