Daisy42: Ref. Retirement AIM.
Over the many years on this Forum the subject has "surfaced" frequently although perhaps not exhaustively. I have also looked at the issue and have devised my own method on the following:
1 A Retirement AIM. . . RAIM. . . should have a large enough stating capital to provide a good monthly income. . . I see it as an alternative to keeping the money it in the bank. The RAIM should have say a minimum of $ 100000 which is very roughly $ 700/month if that capital is banked at ~ 3%/yr and after 15 years the account is then empty. When invested in an RAIM the monthly yield would on the average be probably close to $ 1000 per month. The assumption is that one has some other type of pension so that a withdrawal of $1000/m is not a hard requirement and the investor can go for periods without drawing on the RAIM and even execute the indicated Buys @ price dips;
2 The RAIM should preferably be executed with a Portfolio in which a number of stocks are aimed individually rather than as a lumped "mutual fund” . . .This captures the volatility of each fund optimally;
3 The way I have discussed this in my book "The Vortex Method" is as follows:
i. Just like as is advised on this Forum the Equity allocation should be on the high side . . .between 60 and 95 %, depending on the market condition. This is a very individual thing and is related to the skill of the investor in regards to thinking what is going to happen;
ii. Considering that the perspective is to extract money on the average the Sell Aggression of the Trade Advisor should be on the high side and the Buy Aggression should be low side.
This will result in a generally taking out more money out of the AIM than is put into it . . . on the average the number of shares in the Equity Base should drop . . . ideally the RAIM equity should be targetted to be depleted towards the end of the allocated ~15 year Retirement period (if started at about 65 years of age).
In Vortex AIM this is very easily achieved by setting the Hold Zones and Aggression Factors simply as follow at the start of the RAIM:
Buy HZ = 12-15 %
Sell HZ = 8 - 5 %
Buy Aggression = fb = 0,4
Sell Aggression = fs - 0,6
This is a good start as an Asymmetric AIM that "leans" towards Equity Depletion. As the time goes on the behaviour of the market and the specific and the specific stocks will dictate if the parameters need to be adjusted.
In Standard AIM, which functions generally the similar as Vortex AIM, this can be achieved using similar Holding Zones and Asymmetric Safes. For example:
Buy Safe = Sb = 0,3
Sell Safe = Ss = -0,1
These Safe settings actually reduces the buying aggression and increases the selling aggression in the same way as this happened in Vortex AIM. In this it is even possible to combine this with a variable PC Update factor:
PC2 = PC1 + x* Buy. . But the Effect of this has on the Standard AIM I have not investigated in detail.
If x > 0,5 then this generally increases the Buying Aggression but it delays the first Sell after a price Rebound because of the elevated PC, which is good if the rebound continues but bad if the rebound is limited in magnitude. At the same time it increases the Sell Magnitude after a delayed Sell Advice. This is good for the RAIM. . Perhaps this variation of the PC-Update Factor in Standard AIM is studied exhaustively by others, I feel unqualified to make hard conclusions on it.
With x < 0,5 this results in a lower PC-value and accelerates the selling after a Rebound in price but reduces the Sell magnitude. . this appears not good for the RAIM.
Considering these aspects it appears to me that x > 0,5 favours Retirement AIMing for high volatility equities and x < 0,5 is better for low volatility equities. . . If I am wrong on this please explain.
