Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Re : Leveraged/non leveraged rotations
The top two charts in this image show how XS2D/TIP (half in 2x S&P500, half in TIP) rebalanced once yearly compared to SPY (S&P500 ETF). Those values are total gains including ETF fees (but excluded taxes). The adjacent top chart is for SSO/TIP and a longer timeframe. Generally the two compare quite well IME. (XS2D/TIP left column of images, SSO/TIP on the right)
The next charts below those top charts shows the spread between the half in 2x, half in bonds compared to 100% stock (SPY). At times the two do drift, sometimes in a positive manner, sometimes in a negative manner.
The bottom row of charts is the gains if you arbitraged the two and rotated into the 2x/TIP choice when it was lagging SPY, and rotated back into 100% SPY whenever the 2x/TIP choice was leading SPY. The trigger point in both of those charts was a 4% spread (based on monthly reviews). i.e. if SSO/TIP was lagging SPY by -4% then rotate into SSO/TIP and when SSO/TIP was leading SPY by 4% rotate back into SPY. No trading fees were considered for such rotations, however the benefits would more than compensated for such trading costs (the frequency of rotations is also relatively low).
A leveraged ETF generally scales up exposure after each rise, and reduces exposure after a decline i.e. amplifies gains, attenuates losses. The spread between the two can also be a consequence of LIBOR versus (in these cases) TIP i.e. if TIPS pulls relatively ahead it can trigger a switch out of TIPS trade event (or into TIPS if TIPS are relatively down). With both of those sets currently rotated into 2x/TIP that is a potential indication that the 2x/TIP will perform more strongly than SPY i.e. either decline less or rise more. My guess is that's more a move to 'declining less'. But that's just a guess that doesn't matter as you just react to whatever occurs when using such a strategy.
I believe in the US you're taxed more for shorter term gains (trading often) whereas in the UK we're not, so such a rotational strategy might not be appropriate for US investors as you can at times see relatively quick turn-arounds (short periods between rotations).
If one had the desire, when AIM was fully invested, one could start buying additional shares on Margin and hope that the recovery wasn't too far into the future. A modest margin position in March of 2009 would have been paid down by year's end at a reasonable expense relative to AIM's profits. If there were ever a prudent way to use Margin, AIM would be it.
I agree that AIM is a great management tool. But, like all tools, it sometimes needs sharpening as knowledge is gained or other conditions change.
That image
is fractal - similar pattern can be seen at both the small and large scales. Take for instance this set comprised of something like Steve's choice of holdings that I made some time back (not the exact same set as Steve's, but quite a bit of overlap).
If you created a similar left to right (sorted) range of worst to best performers you'd see a similar overall pattern to that first image above.
Generally pair the most worst with the best and the next worst with the next best ... etc and the two cancel each other out, leaving a surplus middle core left over - which might be considered as the overall portfolio uplift effect.
Simply the winners tend to counter balance the losers - and more (to leave positive bias). That positive bias being fractal means that the equal weighted set of 20 odd countries is more likely to provide a overall positive reward (tend to be more toward the right tail than the left tail).
An approximately equal weighted blend of stocks from a range of countries is safer than over-weighting any one single country and is little different to diversifying across sectors or stocks rather than over-weighting individual sectors or stocks.
Some say that you need to hold the entire haystack in order to capture the few best performers and that its those best performers that drive overall gains - but you don't (and it isn't). Consider for example the long term comparison of the Dow - which is comprised of just 30 stocks, with that of the S&P500 which is comprised of 500 stocks. Long term the two have tracked each other reasonably closely. If you created best to worst sorted individual gains you'd see a similar pattern to the image above for both, but with the Dow having more granularity in being a smaller number of samples than the S&P500 set.
If you do go for individual stocks, just ensure that no one stock is too much of the whole. 30 stocks equally weighted and each stock represents a 3.3% risk factor, 50 stocks and each stock is a 2% risk factor. Entire indexes can gain/lose 2% in a single day. Also make sure you diversify stock holdings widely, across sectors, factors, styles, countries, regions, as you don't want too much weighting in any sector/factor/style...etc when that sector/factor... turns out to have been the worst choice.
Looking at individual countries worst case 30 year real (inflation adjusted) rewards and a global equal weighted choice of stock holdings is the more likely to be towards the right tail. The global equal weighted in this chart was comprised of all 20 countries equally weighted, rebalanced yearly and included the range of countries that at times had pretty horrible results.
[data sourced from http://patrickoshag.tumblr.com/post/93207823244/the-dangers-of-portfolio-patriotism ]
Only the US and Australia beat that equal weighted global set. Potentially future years might see similar spans/patterns, but with the names (countries) switched around and the US continuing to remain towards the right tail is by no means a certainty. In contrast the equal weighted set is more likely to remain somewhere closer towards the right tail rather than being pushed down towards the left tail.
Whilst the only global equal weighted ETF that I am aware of has been withdrawn, you can get a reasonable approximation IMO using a combination of VPL, VTI and VGK, which collectively comprise 23 different countries.
VPL has performed relatively poorly in more recent years compared to VTI and could as such have some value/potential.
Comparing those three equal weighted with MSCI World Equal weighted index, the three matched/bettered that index over each of 1, 3, 5 and 10 years.
http://www.msci.com/products/indexes/strategy/alternatively_weighted/equal_weighted/performance.html
Annualised gains of 1 year 9.5% (versus 7.2% for MSCI Index), 3 year 17.4% (14.6%), 5 year 10.1% (8.2%), 9.6 year 6.5% (MSCI 10 year 6.42%). [History of the three ETF's is limited to 9.6 years].
Minimise the risks and the rewards will take care of themselves. 23 countries, 3 continents, a range of different currencies - all via 3 separate holdings is one method of such risk minimisation. Especially when near equal weighted (not too much weighting into any one single risk (country, currency, region)).
Happy Birthday Tom.
The present is always such a wonderful gift - love that photo.
Clive AIM protocol used for both buying and selling: Sell on first down move after an upswing and Buy on first up move after a downswing
Re AIM Beta
Not the same as I described earlier, but as a quick test I set up a AIM of VISVX and where AIM cash was set to SPY.
50% initial cash, 10% minimum trade size, 10% buy and sell safe, 50% Vealie.
i.e. as AIM indicates buy trades, then cash (SPY) reduces and VISVX exposure increases; As AIM indicates sell trades then VISVX exposure decreased, SPY exposure increased.
Total gains (including dividends)
AIM SPY
1999 11.1% 20.4%
2000 5.8% -9.7%
2001 0.7% -11.8%
2002 -17.4% -21.6%
2003 33.4% 28.2%
2004 16.7% 10.7%
2005 5.4% 4.8%
2006 17.4% 15.8%
2007 -0.7% 5.1%
2008 -34.8% -36.8%
2009 31.2% 26.3%
2010 22.6% 15.1%
2011 -2.0% 1.9%
2012 17.6% 16.0%
2013 34.3% 32.3%
100% Stock AIM (AIM beta)
Just a observation. Stocks in net real terms (after cost, taxes and inflation) are similar to a coin flip game with 50/50 outcome. That's taking into account that a 50% decline takes a 100% subsequent gain to get back to break-even.
Stocks broadly rise because the coin is loaded and typically comes up heads (up) around 6% more often than tails (down).
d'Alemberts betting sequence can turn a 50/50 outcome game into a profitable game. Start with 1 unit stake and after each losing play increase the stake by 1 unit, after each winning play reduce the stake by 1 unit (minimum stake 1 unit).
In a casino there are unlimited cases of potential losing sequential sequence, with stocks however there are finite losing sequences.
1 unit and if prices drop 33% increase the stake to 2 units. If the price falls 66% below the original increase the stake to 3 units. Excepting bankruptcy, the share price can't fall to 0% or less - so the maximum stake is finite.
Historically since 1900 for US data if you started with 1x (non leveraged exposure) and increase that to a 2x ETF (twice leveraged) after a 33% share price decline, and a 3x after a 66% decline, then you're portfolio would have been more rewarding overall. In some cases that could get very nasty however i.e. Japan post 1990.
A less extreme version might be to use stocks with higher beta (volatility), such as small cap value or high yield stocks etc.
Conceptually if you run a AIM with 100% stock holdings (no cash), but manage that AIM as though there were cash and each time a buy signal occurred you moved the buy trade amount of stock out of a index fund into a small cap value fund, and vice-versa when AIM signaled to sell stock you reduced small cap value fund and rotated into index fund by the amount of the sell trade size amount, then AIM might steer you to having average beta prior to a decline and having moved into higher beta after a decline, which might then rebound more/faster subsequently, before AIM moved you back into lower beta holdings again.
100% stock exposure all of the time, but varying the overall portfolio beta to have increased beta after declines, reduced beta during subsequent rebounds and reset beta once recovered.
As a example, from 20th March 2009 market lows to the end of 2009, VISVX (small cap value) rebounded 68.3% compared to SPY rebounding 47.6% (total gains) [for reference from 20th March 2008 to 20th March 2009 VISVX dropped 43.6% compared to SPY 40.4%].
I suspect that could provide some interesting and potentially more rewarding results.
Have a great weekend.
Clive.
Hi Toofuzzy
Your annalisis makes sense intuitively but it doesnt seem to address the benifit of Aiming, the advantage Aim gets from increased volatility. Am I missing something? I wonder what the difference would be between using leveraged funds or just using LOW DOWN AIM where you just set portfolio control to 2 or 3 times innitial buy amount with SAFE of 5% and min order size of 10%
Re Solar Animation
That animated image is somewhat dated now as in 2013 NML Cygni was found to be around 16% bigger (would take a beam of light 6 hours 40 minutes to circle it once - and light travels 186,000 miles per second).
RE : LETF's
Hi Toofuzzy.
Leveraged ETF's by themselves across a uptrend will tend to scale up rewards. A 3x daily for instance might rise 4x the 3 month underlying index price change. In effect the LETF is adding more exposure after each up move, less after each down move. They can also drop less than 3x during across a down-trend, perhaps 2.5x instead of 3x the move. Tracking such relative moves and buying in at lows (when the mid term tracking has deviated to quite a wide spread) can provide a reasonable entry timing signal.
For actual trading/investing in general, I find that the 2x is about the best choice however to actually hold. Half in 2x, half in bond over any one year period will reasonably track the underlying over that year long period. In rebalancing once/year however that means the bonds can be locked in - there's no liquidity issue.
A 5 year ladder of bonds when each rung is held to maturity will reward somewhat close to the average of the rolling 5 year yields (not marked to market) and have one rung maturing each year. If you coincide the 50/50 2x/bond holdings with such bond maturity then bonds are earning the 5 year yield whilst the LETF is paying overnight lending rate to provide leverage. Generally that cost of providing leverage incurred by the LETF fund will be lower than the 5 year treasury bond yield. That spread helps offset other costs/taxes.
As a simple example a 2x Dow LETF might invest your deposit in the Dow stocks and then borrow the same amount again at 0.5% cost of borrowing to buy more Dow stocks so that you're holding 200% exposure of your deposited amount. If that's half of your total allocation and the other half is invested in 5 year yields that pay 2% interest, then there's a 1.5% difference between what the fund is paying to borrow and what you're earning from bonds. The LETF might have 0.6% fees/costs and with 50% exposure to those fees = 0.3%, whilst the lend/borrow (bond) spread = 0.75% (relative to the total portfolio amount) = 0.45% benefit. The Dow stocks might be paying 2% dividends and 15% tax might be deducted from that = 0.3% tax, which the 0.45% benefit offsets (and more in this case i.e. overall +0.15%).
If there is a big drop in the Dow and the 20% of bonds maturing from one rung is insufficient to cover how much more LETF needs to be added, then generally the next bond rung being 1 year from maturity will be relatively close to its par value/price in having just 12 months remaining to maturity.
Compared to the alternative of holding the underlying (1x) I find that is more expensive on a net basis. 0.1% fee, 2% dividend and 15% tax = 0.3% for a total -0.4% lag of the index gross total return. If instead you're achieving a +0.1% premium above the index gross total return = 0.5%/year more reward. A modestly small amount - but over time that can compound out to a sizeable difference.
The benefit (higher reward) is reflective of the additional risks. There's the counter-party risk for instance - the institute that the LETF might hold the swap with. There's also interest rate risk as a 5 year ladder will lag tracking interest rates upwards (but hold on to higher yields for longer when interest rates are declining). And under periods of high interest rates the cost of borrowing might be more than 5 year yields (inverted yield curve - generally the yield curve does tend to be less often inverted, but when it is the spread can be quite wide). For many it wouldn't be worth the bother. Even at $1M invested for instance if you're making 0.5% more = $5000/year 'wage' for the efforts required to manage the positions - or perhaps less, for instance Vanguard might charge just 0.07% fee, benchmark to the NET return that might be 15% less dividends than the index, and then outperform the benchmark, so perhaps lagging the gross total return index by maybe 2% dividend minus 15% tax = 0.3% plus 0.07% fees = 0.37%, but through good management (perhaps some benefit from share swaps etc) maybe reducing that to a 0.2% lag of the gross total return index. Equally however you might take on more risk and trade the 50% bond allocation, and perhaps enhance rewards of the 50/50 LETF/bond holdings. Personally I play it that way myself as there are often better alternatives to treasury 5 year yields that have relatively low additional risk (high street bank 5 year bonds for instance that are in effect insured by the state - but that yield more than 5 year treasury bonds. Those however might be fixed term, no early withdrawal, so in the event of needing perhaps the maturing and next bond ladder rung amounts to top up LETF exposure you'd have find some alternative source of funding to maintain the position (such as swapping some holding into a 3x LETF)).
Not applicable to me, but I believe another benefit of rebalancing in the US would be that pushes any gains into being long term (>1 year) rather than short term, which I believe are taxed differently in the US (???).
etfreplay.com is quite a good web site to have a look at such positions. From their main page select the "backtesting" dropdown and then the "ETF Portfolio" option and perhaps enter a allocation of something like SSO 50%, TIP 50% and compare that to SPY (the default) over different single year periods.
Anyone have any thoughts on Aiming the Proshares 3x funds or the Direxion funds
BTW, who are those happy people in that photo?
To start Aiming the 9 sectors, pick the 3 that have done the WORST
where they buy before market close , for ex-dividend date, so they "own" the stock to collect the dividend and then sell it the next day or so, pushing the price down.
RE Animated cycles
Dead link in the archives http://web.archive.org/web/20101107204512/http://www.aim-users.com/arch06.htm#oct
and on IH also http://investorshub.advfn.com/boards/read_msg.aspx?message_id=14010716
rotation.gif or rotation03.gif.
I may have it on a old hard disk, but I'd need a adapter to read the disk as non of my current systems can accept the older format.
Good grief - from the 1997 archive http://web.archive.org/web/20100527112732/http://www.aim-users.com/archive.htm
PS: I'm glad to see you are doing your homework. It's been a very long time since I originally posted that cyclical graphic! So, it appears you're doing some serious AIM history mining!
Re: Extended Hours
Good example today...
YHOO
Currently i am not using equal weight, but do it the way Lichello described it in the book. When you have a buy, you can buy any stock, Lichello tries to buy a new stock.
A typical Value weighted index might allocate relatively more to stocks with a lower Price to Book Value and less to stocks with higher price to book.
Cap weighted allocates more to stocks with a higher market capitalisation value, less to smaller stocks.
Equal weight just weights each stock equally.
Kelly's formula is just a way of putting mathematical figures/amounts based on probabilities - risk more if the chance of a win and payout are relatively high, risk less if the odds are less favourable. Don't risk anything if the odds are 50/50.
Re Kelly weighted
I know of 3 different approaches to Index building:
1 - capital based
2 - equal weight
3 - Kelly weighted
Re : Equal weighted
Couple of historical equal weighted index data
http://www.bogleheads.org/wiki/Equal_weighted_indices#Appendix
http://tinyurl.com/k8zbya6
With equal weighting, say 1% in each of 100 stocks, there's a finite downside per stock (100% loss of the 1% allocation), but a (theoretical) unlimited upside. 1% allocation to a 10 bagger (10 fold gain) adds 10% to the total portfolio value. 1% allocation that loses all hits the entire portfolio for a 1% decline.
A bit like buying lottery tickets. With equal weighting you select different numbers for each ticket, with cap weighted that perhaps has one stock 10% weighted its like buying 10 tickets out of the 100 and putting the same numbers on each of those ten tickets. Large stocks also have less tendency to gain 100's of percents, whilst smaller companies can/do. IMO that explains some of the 'small' premia. Value generally represents something that has already endured a sizeable decline and where that loss was carried by someone else, in effect reducing the downside some (broadly) for the buyer of value. Hence a small-value premia (tendency to relatively outperform). That's not a constant thing however as its more a lottery type thing (sporadic/intermittent). Generally if you look at the histories of such indexes for much of time they might broadly compare with the average, but its the less frequent big up outliers that generate the overall outperformance (occasional winning lottery ticket).
The difference between 0% safe and 20% min order size or. 10% safe and 10% and minimum trade size, is what happens with consecutive trades in the same direction.
With the first, you need an additional 20% move, with the other you only need an additional 10% move.
Diversify by either style or industry using index funds, not individual stocks.
Personally I don't.
I use http://investorshub.advfn.com/boards/read_msg.aspx?message_id=93888711
Yes equal monetary value, but also you can use percentage weightings. The median weighting of all holdings is an appropriate choice of mid value target amount. That can be measured as a percentage i.e. the stock value divided by the total portfolio value for each holding, or a actual capital value amount (median value of all stocks held). Or the median % can be transposed to a capital (money) value. Its not a fixed monetary value, but a dynamic monetary value that generally changes from one review to another (reflects the overall average value). That median is just a ideal target monetary value that all holdings would be leveled to, but leveling each and every asset is expensive so you just focus on the outliers - those that are furthest either side of the median. So if one is 1.5 times the median then reduce that by a third and add the proceeds to another that might be half the median value. 25 holdings, median value $10,000, one at $5000, another at $15,000 then sell $5000 of the latter to add to the former. You might have others at $9000 and yet others at $11,000, but that's relatively small amounts to warrant spending money to rebalance them to $10,000 each. You just want to focus on those at the left and right tails (that have gained/lost the most relative to the average (median).
Depending upon how much is invested a simple rule of reduce by a third when 1.5 times the media, or when 0.5 times the median then double up the number of shares could be a reasonable choice of hold zone range. In some cases you might not have enough that are being reduced to top up those that are relatively light. In other cases you might have some surplus cash after rebalancing. Its more of a art than a science - just a relatively inexpensive way to target somewhat close to a approximately equally weighted (or valued) set of stocks and approximately equally weighted set of sectors. That way you're neutral overall and can just reduce whatever so happens to be the big winner(s) that year and top up whatever happened to be the years biggest loser(s). More often you'll be totally surprised by what stocks/sectors actually produced the wildest (largest) positive and negative price changes.
Hi K.
Some ETF's benchmark to a net of 30% US withholding tax based index. So if a 2% dividend yield the 'benchmark' is 0.6% lower than the 'index'. That provides the impression that the actual fund much more closely matches the benchmark.
Ireland as for the UK only pay 15% US withholding tax, so they're quids-in (in the money) there. Better still they might partake in stock lending - which can entail lending the stock to a US party the day before x-dividend and then having the stock returned on the x-dividend day together with a cash payment in return for having 'lent' the stock that might compare to the full dividend that the US party was paid (no withholding tax deducted). So even more quids-in.
Sure does help to make tracking the 'benchmark' that bit easier. Some funds can even cost in and profit even with a 0% expense ratio (fund management trading fees and costs are typically absorbed by the fund (taken out of dividends)).
Oooooh look how closely we track the (net of a 30% lower dividend) benchmark ... and how low our fees are. All a bit of a illusion when the benchmark is lower than the total return index and they're benefiting from security lending 'tax mitigation' that borders on illegal tax-evasion.
The best of course is shares itself. Buying in several sectors based on Value seems nice to me
Just to reiterate a relatively quick way of visualising next trade prices is to calculate
N = PC/#shares
and then divide N by 1 + safe + MTS for the next sell price, divide N by 1 - safe - MTS for the next buy price.
10% buy safe, 10% MTS is no different to 0% buy safe, 20% MTS, both have you divide N by 1.2. Same goes for sell safe 10%, 10% MTS is no different to 0% sell safe, 20% MTS. Both have you divide N by 0.8
IIRC Steve uses 0% safe settings and just sets MTS to whatever value (I believe he also uses different buy and sell MTS values in reflection of a 10% decline requires a 11.1% gain to get back to break-even).
Hi Allen
Thanks for book rec.
FT = Financial Times
For instance if you look at http://markets.ft.com/research/Markets/Sectors-And-Industries/Consumer-Goods you'll see Consumer Goods sector data
The sector has 1 year gained 14.76% as of timing of writing, however within that the average gain of all of the different parts is 23%
The best part was Consumer Electronics with a 1 year up 165% relative to the equal weighted sector average gain (up 61.3% in nominal terms). The worst was Non durable Household products thats down -67.2% relative to the equal weighted sector average (up 7.1% nominal).
If you considered the average to be a inflationary uplift amount (obviously its not at least over the shorter term, but as a indicator of how considering such eliminates upward inflationary bias), the the best and worst extremes had gain factors relative to the average of
0.328 Worst
2.658 Best
i.e. part gain / sector gain figures, which for those two extreme cases produces
0.872 Product
1.493 Average
With equal weighting periodically rebalanced you'll tend to capture more towards that average figure, with buy and hold you'll tend to capture more like the product figure. With nearly 20 parts in that sector and two of them enduring such characteristics, that's 10% exposure to such characteristics. 0.1 x -12.8 = -1.28%; And 0.1 x 49.3% = 4.93%; A 6% spread relative to that sector. If the sector is 10% of the whole (assuming 10 sectors) that's 0.6% relative to the whole. And other sectors might be churning out a higher figure.
With buy and hold you in effect say OK one part has risen a lot but I'll let it ride, and another has relatively declined but I'll also let that ride. Its then relatively overweight one part that has risen a lot and underweight another part that has declined a lot. Yet often the one that has risen (or fallen) a lot isn't the best (worst) the next year.
Generally the effect of reducing the best performing holding and adding to the worst performing holding has a positive effect Which is what AIM tends to do. AIM doesn't have exclusivity on that however and there are many alternatives. Praveen's AIM board for instance strives to maintain equal amounts invested in each holding. Others have noted how such equal weighting tends to relatively outperform over the long term for instance John Mauldin wrote a article some time back that compared the equal weighted Dow since the 1920's with other choices of Dow management - and the equal weighted came out best.
Rebalancing all holdings back to equal weighting however is a costly process, you have to strive to minimise such costs - such as perhaps just rebalancing the best and worst 10% of holdings (20% of assets perhaps having half the value churned = 10% churn). It can also all get rather complicated if you try to do things yourself. The benefit is fractal and is apparent at the stock, sector and market/index levels, so if one sector has 50 stocks and another 2 stocks do you allocate the same amounts to each sector, or to each stock? A simple answer is not to concern yourself with that and just let AIM take care of things. Allocate what you think to be appropriate to each AIM and then given just the price AIM will have you add or reduce in a appropriate manner over time.
Another relatively simple and trade cost efficient choice is to equal weight a diverse bunch of stocks, sectors or indexes and whenever any one breaches 1.5 times the median weighting then reduce it by a third and add the proceeds to any that are below the median weighting
The point of the cash burn chart is to give you an idea of what you're opening yourself up to with the settings you might use with AIM. If you say to yourself, "I don't need no stinkin' cash! I'm gonna just use 20% as my starting cash position." Well, that's fine. However, how much of a downturn in the market can you participate with AIM if you use 20% SAFE total? You'll run out of cash with a 34% decline in your starting share price.
Could you please identify each of the sectors next to the figures? Also, do you know how they compare with equivalent US sectors?
1 Apr 08 3645 4770 5696 2156 4819 2715 2292 1740 4713 3856 428
6 Oct 08 2882 3983 3103 1674 4012 2933 1848 1438 4684 2843 378
31 Dec 08 2759 4763 2586 1596 4212 3232 1757 1580 4474 2070 329
1 Apr 09 2533 4446 2995 1479 3830 2815 1754 1398 3795 1691 386
1 Jul 09 2839 4716 3614 1644 4219 3005 1879 1413 4034 2138 470
1 Oct 09 3351 5260 4237 1966 4941 3324 2194 1651 4294 2774 566
31 Dec 09 3590 5749 5447 2083 5393 3588 2318 1739 4710 2691 589
1 Apr 10 3865 6061 6290 2338 5872 3620 2527 1814 4763 2859 688
1 Jul 10 3293 4415 4684 2150 5328 3483 2252 1741 4602 2472 634
1 Oct 10 3859 5533 5913 2464 5955 3783 2537 1969 5124 2898 781
30 Dec 10 4112 6038 7137 2670 6531 3721 2658 2126 5442 2905 794
1 Apr 11 4220 6528 7008 2760 6442 3779 2563 2260 5598 3002 866
1 Jul 11 4266 6304 6849 2878 6869 4141 2696 2184 5977 2965 897
3 Oct 11 3626 5462 4696 2385 6706 4031 2329 2169 5956 2265 813
30 Dec 11 3969 6491 5173 2671 7291 4416 2511 2380 5942 2349 865
2 Apr 12 4283 6537 5566 3083 8042 4358 2671 2421 6348 2745 985
2 Jul 12 4151 6211 4820 2977 8089 4459 2612 2534 6782 2627 928
1 Oct 12 4350 6283 5118 3195 8339 4502 2798 2553 6988 2860 1033
31 Dec 12 4458 5980 5417 3272 8607 4350 2967 2349 7027 3139 1142
2 Apr 13 4975 6359 5033 3859 10186 5088 3398 2904 7716 3502 1316
1 Jul 13 4908 6246 4278 3856 9831 5235 3496 3009 7701 3517 1270
1 Oct 13 5108 6152 4773 4158 9634 5246 3772 3437 7819 3662 1414
31 Dec 13 5385 6690 4851 4374 10083 5685 3960 3807 7906 3795 1507
1 Apr 14 5395 6662 5012 4376 10274 5973 3933 3521 8269 3737 1528
1 Jul 14 5517 7295 5057 4242 10741 6580 3860 3388 8672 3743 1394
do you know how they compare with equivalent US sectors?
Tom RE Memory Lane
http://web.archive.org/web/20060114090034/http://www.aim-users.com/etfunds.htm
Randomly selected from http://web.archive.org/web/20060415000000*/http://aim-users.com
IIRC your figures excluded cash interest/dividends? And often cash earns more than dividends (your AIM charts differ to mine in that my cash values show progressively upward slopes whilst yours are generally flat-lines).
I still hold CHY to this day by your lead. I know you moved out of that due to its return of capital and high fees - but the rewards have continued to be good enough to more than compensate.
An extract from that web page is most informative/instructive IMO :
As the core of the Individual Retirement Account (IRA) I purchased a long term bond fund. While technically an Exchange Traded Fund it is further distinguished to be a "Closed End Fund." I've used this same bond fund for years as an income producer and feel it is a solid foundation to the IRA. I allocated 40% of total available assets to this part of the account. It was further divided into its AIM Equity and Cash Reserve portions.
I then chose as business sectors Biotechnology (IBB), Consumer Cyclical (IYC), U.S. Energy (IYE), U.S. Financial Service (IYG), U.S. Health Care (IYH), and finally U.S. Technology (IYW). Each of these components received 10% of the grand total available. Again, the amounts were further subdivided into AIM's Equity and Cash Reserve components.
I used my I-Wave to determine what amount should be allocated to the equity and cash sides for all the ETFs. At the starting date the IW was suggesting just 23% Cash Reserve, so 77% was invested. Please check the current I-Wave before starting your own ETF accounts.
By having each sector follow its own lead, AIM then can be proactive with each. If Energy is UP, AIM can sell some of it. If Consumer Cyclicals are DOWN, AIM can be purchasing some of it. This is the strength of a portfolio made up of various AIM Sector funds. In a diversified mutual fund, AIM gets conflicting information. If Energy is UP and Cyclicals are DOWN, AIM might say to do nothing. By separating out these components of a diversified mutual fund AIM can act on your behalf with each.
Thanks Tom
SPY being more "fund-like" tends to not offer as many compounding LIFO cycles. If SPY is divided out into its 9 general business sectors and AIM-High applied to each, then there are many more cycles to add to the return. I, too, used to keep a model of SPY and of the 9 business sectors running. Unfortunately I gave it up some years ago. The 9 AIMs did FAR better than the single SPY AIM. That was a direct result of the compounding LIFO activity of the cash.
RE: AROC - Average Return on Cash
Tom has used ROCAR for many years now, but out of interest I thought I'd have a look at swinging that around the other way. Level the stock according to the amount of average stock exposure and look at how AIM traded a higher cash reward by dipping in/out (trading) stocks.
A SPY AIM-HI record that I have to hand shows a 8.52% annualised gain with 18.43% average cash. That includes dividends being reinvested into more stock and cash interest being added to cash. Buy and hold of stock yielded a 8.45% annualised gain.
Cash over the period earned 5.16%.
Instead of ROCAR, what if we just proportion that average amount of stock exposure times the buy and hold stock gain. So 8.45% buy and hold stock annualised gain x 81.6% average stock exposure = 6.9% of the total AIM gain could be attributed to stock exposure. That leaves the total AIM gain of 8.52% minus that 6.5% attributable to stock amount = 1.62% of the total gain being attributable to cash, and with 18.43% average cash exposure time = 1.62 / 0.1843 = 8.8% average return on cash (AROC). That's some 3.6% more than what buy and hold of cash earned.
i.e. similar to 81.6% exposure to stocks that earned 8.45% annualised and 18.43% exposure to cash that earned 8.8% annualised (0.816 x 8.45) + (0.1843 x 8.8) = 8.52% = the gain that AIM produced.
Compared to simple average weighted gains of ( 0.816 x 8.45% ) + ( 0.1843 x 5.16% ) = 7.85%
i.e. AIM trading in effect added 0.674% annualised to total gains.
RE: GRUB Winners
PS: I went back to post 20000 and noticed that somewhow the counter got off, so there may not be a speciic record of the actual winners.
Cost averaging helps reduce the risk of being the worst case (but equally reduces the chance of being the best case). More often however 'average' is a good result - and AIM helps ensure that you tend to achieve that 'average'
Hi Toofuzzy
N = PC / #Shares and then for next trade prices dividing N by 0.85 and N by 1.15 (for 10% safe, 5% minimum trade size) just needs a basic calculator.
You could use a tablet or phone I guess, but past experiences have expressed how relying upon 'data' (electronic storage) can be flawed. Less so now with the cloud, but in the past I've had hardware fail only to then encounter restore from backups failure.
Plus I hate wearing glasses and I can't see the tiny text on phones without such aid.
When you do a Vealie and increase Portfolio Control, does this mean that when a downdraft starts the buying will be delayed?
It seems to me that if you compare the various parts of the normal business cycle for a given sector, B&H is better in the up cycle and much worse in the down cycle, whereas AIM does okay in an up cycle and gang busters in a down cycle in that it holds losses to a minimum and regains losses faster than B&H. This is what I get from Lichello's book(s) and observation. Is this correct?