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Does anybody know of a foreign or globally based REIT type closed-end or ETF? I'm thinking that whilst the US real estate market might be off (understatement award time) real estate markets elsewhere might be doing some better.
Thanks!
Best,
AIMster
That was a pretty good see-saw day yesterday. We've not seen this sort of Bull/Bear Battle in a while.
Today's shaping up like a summer picnic game of 'tug-of-war' between the Bears and the Bulls, with both sides seemingly pretty evenly matched, at least for now...
Best,
AIMster
From the "food for thought" department. Another interesting agricultural play, people and critters needing to eat, after all comes to us under the symbol MOO - holy cow, they've humor almost as bad as mine with that symbol. Nonetheless, the fund:
FUND SUMMARY
The investment seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAXglobal Agribusiness Index. The Fund normally invests at least 80% of total assets in equity securities of U.S. and foreign companies primarily engaged in the business of agriculture, which derive at least 50% of their total revenues from agribusiness. Such companies may include small- and medium capitalization companies.
Not so much history on it yet, but the global nature of it might give us something to chew on, rather than some single domestic company.
Maybe an investment that will grow on you, if you don't chew up too many profits along the way...
Best,
AIMster
have thought of doing this, converting from separately managed single stocks to a single portfolio of stocks with periodic rebalancing.
I believe TooFuzzy's called this model "Slow AIM". In theory you could run such without any cash reserve at all, IF (you'll note the key word I just used) you have sufficiently non-correlated assets such that at the time of your rebalance you have enough at profit to feed into the laggards. Of course, if this is done in a taxable account there will be capital gains consequences. Similar to Tom's 13 month review I would suggest a 13 month rebalance cycle so in more years than not you won't be rebalancing the same month likely everybody else is, which may impart some slight spin on the market. On the other hand you may avoid sales altogether with a cash reserve and then once a cycle use the cash you've saved to purchase more of the laggards, deferring any capital gain consequences into the future.
Since you have everything in one portfolio, and that effectively becomes like a mutual fund, or index, depending on how you look at it, do you use a smaller cash reserve than you would for individual AIM models?
Good question. Generally speaking a portfolio, especially with non-correlated items will move with less rapidity than the individual stocks or funds in it will. The caveat on this side is that the minimum transaction size will be commensurately sized to the portfolio total. Thus if your holding of an individual stock called for a $500 transaction, your portfolio may well call for a $5000 transaction, given the same percentage. So consumption of cash reserve will, in the case of individual holdings likely be drained off in a series of smaller multiple transactions, or on the whole portfolio model a few good "whomps" of the proverbial axe blade, though less often, just cutting through it in larger chunks.
I suppose one could use the stockcharts perf charts and compare the individual holdings to get a sense of their correlation over time. The more tightly the correlation, the bigger I'd recommend the cash reserve to be, as the portfolio will respond to the sum of their activity.
BTW, FOLIOfn's made this even more interesting by their new pricing model which allows one to hold unlimited numbers of folios containing from 1 to 50 items each. So I could, with some tuning create a series of minifunds and AIM those - not quite the volatility of individual stocks, but more volatility than the portfolio as a whole. Even if I still use the whole portfolio model, (the sum of all the folios) it may be useful to let me see how each segment is performing.
Moving to using these virtual minifunds though could throw the targeted asset allocation back out the window to some degree, but would one be better served trying to capture the movements in the market no matter in what segment they are in? Decisions decisions... I might have to do some testing in this area.
Thanks for the provocation! Keeps me pondering...
Best,
AIMster
guess the best way to convert these into AIM accounts is to sell a few shares. Or should I just put the new monthly savings into a money market fund and and start building cash reserves on the side. Will probably be a slower approach.
As I understand correctly, AIM book suggests we sell a portion of the the existing equity to start an AIM fund? correct?
The book does suggest that option, yes, but unless this is in a retirement account you'll have capital gains consequences which may offset some of the benefit of leaving well enough alone. Since you've indicated that you're still in a savings mode, certainly adding additional funds to a money market fund to use for the cash reserve could be less taxing. Depends on the particulars of your situation.
FWIW, as I'm in a similar savings mode and as AIM is mainly a closed-loop system, only begrudgingly accepting new cash, I keep the portion of cash that's not a direct result of AIM or dividend activity separate from AIM, using it as a funding source if AIM calls for a bigger investment than the current cash reserve is. Thus the mechanics of the AIM mechanism are preserved to work as Lichello intended, and I can also have a fund on the side as well. This lets me save periodically without having to split the investment between stock and cash reserve as the book would have me do otherwise, since each one is relatively small each time and would generate a lot of very small transactions. Not that this is required, mind you, I've just developed it as a workaround for those of us who are still making regular savings.
Best,
AIMster
Stocks (60%):
US Stocks: VTI (total mkt), DVY (lg value), SPY (lg cap), MDY (Mid cap), IWM (sm. cap), IWN (sm.cap value)
Sectors: XLE (energy), PHO (water)
Int'l: EFA (developed), EFV (int. value), EEM (emerging)
REIT: VNQ
Commodities: GLD (gold)
Nice selection! One you may want to consider adding is RMT - Royce Microcap trust - that will give you the very small end of the market which should just about make your coverage complete.
Best,
AIMster
Hi all,
How does one use AIM with asset allocations?
Hello, and welcome!
I see TooFuzzy and Tom have already addressed some of your question, at least relative to how one should start off. In an ongoing basis, I believe that asset allocation is better managed when using AIM in the single portfolio model, rather than in the per-item basis. The reason for this is that in the per item model, some will move faster than others and with AIM's cyclic process, become disproportionate to the asset targets you're (pardon the expression) AIM-ing for.
In the whole portfolio model, which I use, I've also a Lotus spreadsheet that classifies all the holdings into asset segments and gives the current and target percentages for each asset class. Thus, when AIM gives a signal, I can use the spreadsheet to help me decide where to move the holdings to conform closer to the targets than they are in the current model. This lets AIM control the macro question of how much invested versus how much in cash, and lets me control the more micro question of where to actually make the adjustments.
Best,
AIMster
Re: "What ever happened to the January effect? What ever happened to the Christmas rally? "
Probably gone the way of most other anomalies. Once any sort of "unique knowledge" becomes commonplace, the advantage is lost. Unless, of course, such knowledge goes out of favor and then the advantage works again. For instance a couple of years back I tried the "Puppies of the Dow" - the 5 most "radical" of the "Dogs of the Dow" - on the theory that this particular technique is SO well known that what the heck... I got over a 27% return a year later. Of course it was in a watch account and not with real money... Narf.
Best,
AIMster
According to the NY Times, we the people did okay last year:
Customers, Not Brokers, Profited in an Odd 2007
The brokers' customers did reasonably well. The brokers did not.
That is not the usual way of Wall Street. Two-thirds of a century ago, a best seller asked, "Where are the customers' yachts?" It noted that somehow the brokers always made money, even when their customers suffered. And so it has been for most of the years since then.
But not in 2007.
How could that happen? In recent years, Wall Street came up with what amounted to parallel markets. Ordinary investors could buy and sell stocks and bonds, but the favored insiders could partake of a host of investments not available to the rest of us. There were specialized securities and complex derivatives, and instruments known by their initials: C.D.O.'s, M.B.S.'s and SIVs.
Full story here:
http://www.nytimes.com/2008/01/02/business/02markets.html?th&emc=th
May this be the start of a trend!
AIMster
Interesting article by Dan Dorfman on goings on (or not) in the fine art world, particularly with regards to the auction house Sotheby's and their attempted auction of Van Gough's The Fields being left out standing in their field and not soliciting a single bid in a recent auction! Well the expected $28-35 million range for it is, well, a tad rich for my blood. Not to mention where the heck would I have to store the piece! Details!
Perhaps this facsimile will have to do for the rest of us:
Meanwhile, Mr. Dorfman's article is here:
http://www.nysun.com/article/68511?page_no=1
What caught my attention in particular is the very AIM-like recommendation:
"My financial adviser is urging me to sell," she wrote, saying the stock, currently at $38.29, "could drop into the $20s if the economy turns sour next year. I love art, I collect it and my gut tells me Sotheby's will come back big time when all the uneasiness about credit, subprime mortgages and housing subsides. I am taking a serious loss on the stock, but I am inclined to hold on. Could you please ask some of your Wall Street experts what they think." I did. Their answer: Hold on; fine art is not dead.
In fact, a Hong Kong money manager, Selwyn Ortz, says he thinks you should consider buying more shares with a two- to three-year horizon. "If there's a recession next year, which is still up in the air, Sotheby's will probably do nothing," he says.
Still, he likes the stock. "The wealth effect is not dead in America and, importantly, it's expanding throughout the world, which means," he argues, "fine art has nowhere to go but up and any setback in this market is temporary." Mr. Ortz, a principal of HK Investments Ltd., is putting his money where his mouth is. Although he has qualms about the market's near-term performance, he more than doubled his personal Sotheby's holdings during the recent dive. "Two to three years out, I believe it's a $75 stock," he says.
So, with this incentive I went over to stockcharts and hmmm looks like considering...
Of course after taking the heat on some of the subprime mortgage debacle this year I've largely sworn off individual stocks - and then articles like this pop up....
Narf!
Best,
AIMster
>
Tom wrote:
A year is closing
with gains and losses showing.
How will 'Oh Eight' end?
'08 ends unique,
mixing hope and fear, also:
Presidential cheer!
Though how that will bode?
On taxes and the world, yet...
'09's story told!
But we get ahead,
Try to peer through crystal ball,
Live the present, now!
As we cross again,
From one year into the next,
Be safe and healthy!
No matter what comes,
Love and health will matter most,
You can AIM the rest!!!
Happy and SAFE <grin> New Year!
Best,
AIMster
First ... BTO [big time operator]
<grin> <OT>
Me, dating myself again, I was thinking more "Bachman-Turner Overdrive" BTO !!! After all, like AIMing, it's "Takin' care of business!!!" For those who don't know, or, even more likely don't care, that was their first big hit from the 1970's.
Full details can be found here:
http://en.wikipedia.org/wiki/Bachman-Turner_Overdrive
Best,
AIMster
Merry Christmas! And looking forward to AIMing into a good 2008!
A Christmas present:
As most of you likely also get the plethora of investing emails, some more dubious or bonafide, depending, one floated in where the author at least had the decency to want to name the stock before you had to put your credit card on the line for a "trial" subscription.
The type of stocks he's looking at are in geothermal energy. Not quite perhaps perpetual energy, but a source the government claims could keep us in lights for 130,000 years. Most popular in the Western US where access to geothermal sources are easier to come by, he also lists other companies doing some form of geothermal.
This one's at the more speculative end of the market, so I wouldn't bet the farm on it, but at $3.06/share, perhaps a couple of hundred or so shares might be enough to give AIM enough to work with and just be a mad money experiment- when I ran their chart it seems like it might well become a pic list contenda if it becomes a bigger player and moves out of the extreme microcap stage.
Still, a chart worth considering, the sort that AIM works with:
Again, Merry Christmas. And if this particular investment won't do it for us, may we all find ones that will!
Best,
AIMster
Both IYG and KRE seem to be highly correlated over the past year.
Hi, TF,
I think you'll likely find a lot of correlation with broad banking related issues, especially as the mortgage/credit issues have spilled over from one to another to another - much like the water in the sections of the RMS Titanic. One other one you may want to look at is BTO - John Hancock Bank and Thrift Opportunity Fund. It's chart is here:
Whilst the distribution isn't as high as KRE's the discount relative to the NAV is a lot more -0.44% for KRE against -12.82% for BTO. Both are at the lower end of the 52 week range so the risk is certainly a lott less than it would have been months ago.
Best,
AIMster
Fatal visit to stock exchange
(China Daily)
Updated: 2007-12-19 10:27
A 61-year-old man fell unconscious and died minutes later on Friday at a stock exchange in Shijiazhuang, Hebei Province, while watching his stocks slip.
His son surnamed Su said his father had suffered from myocardial infarction and cerebrovascular disease for years.
The market can be very stressful.
R.I.P. At least he died with his heart in his investments, though one would have wished for more of a heart-flutter in joy at rising stocks rather than what was an attack of severe angst, obviously. Which begs an interesting thought - with all those skyscrapers going up in China if these nouveau capitalists start losing bigtime - the largely urban legend of masses of jumpers in 1929 - who knows?
Hopefully the question to remain a proverbial mystery!
AIMster
've been adding 5% to SAFE with each buy. I'm currently at 23%If you do not mind be probing a bit more, how did you come up with 5%? Do you reset the SAFE value once the stock begins to sell (assuming it recovers)?
Well, the 5% was based on TooFuzzy's idea, though I think he uses it with LD rather than regular AIM. I've found it useful as a way to slow the cash burn rate. I will reset it to the starting values once a sale happens, yes. I'm using this on a whole portfolio, rather than per-item AIM model, so each buy order is, as you'd expect, a bit more than what you'd get on a per-item basis. The problem (for me) was on the per-item model, even though the "bites" into the cash reserve would be smaller, there were a lot more of them. The choice, I suppose of wanting one's cash devoured by one big-fish gulp versus being swarmed by pirana?
Since I use a variant of what Lichello called the "AIM Central Treasury" model, i.e., a common cash reserve whether for the portfolio or per-item model, even though I add to it, these recent waves of volatility have invested more in it in a rather short time, thus the use of the buying buffering to slow it down.
Best,
AIMster
What is the best/preferred method for conserving cash in a down market like we have had? Is it the 30-day rule of not buying a particular stock more than once in a 30 day period? What about increasing SAFE values between buys?
I've been adding 5% to SAFE with each buy. I'm currently at 23%
Best,
AIMster
Too close for any firm conclusion to be made IMO other than 1) most likely AIM would achieve around comparable results whilst having some reserves invested in cash, which we might reasonable expect would reduce the overall volatility and 2) if 'cash' yielded a higher average return ;>)
Hi, Clive,
Thanks for your continuing work! Appreciated. One site we've mentioned in the past but not so much lately is riskgrades. http://www.riskgrades.com
With free registration one can create portfolios and see how having various components interact with each other and change the performance of the portfolio. One can see, for example, the impact of cash by creating two identical portfolios, one with cash and one without. There is quite a dampening effect caused by cash - this site lets you see it very easily. You might find it of some use with your own work in this area - and you can't argue the cost!
Best,
AIMster
Hey Cliff
Grub!
It was late! You were hallucinating!
Well maybe we should call that a "high-five" sign grub, or something... though we should probably stick to the usual 1000th sequence - hit 'em too often and the guys at the foundry where they make the SDR's might form a union or something! More work, more wages, etc.
Have a great day.
Best,
AIMster
re: DBP
An interesting alternative to DBP if you want to get into futures with a smattering of metals along with oil and agriculturals (no pork bellies, though) a more broadly based commodity ETF is to use DBC.
Yahoo's descriptive blurb:
The investment seeks to reflect the performance of the Deutsche Bank Liquid Commodity index. The fund will pursue its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the index, or the index commodities. The index commodities are light, sweet crude oil, heating oil, aluminum, gold, corn and wheat. The index is composed of notional amounts of each of the index commodities. The notional amounts of each index commodity are broadly in proportion to historical levels of the world's production and supply.
Best,
AIMster
Maybe a fiat currency is ok if the the country doesn't run a deficit economy?
Hi, Neil,
I think that any "fiat" system is one that is based on trust. Which is at the heart of all economics, really. I mean, as long as you look reasonable, comport yourself in the usual manner, a restaurant will give you a meal on the trust that you've the means to pay for it, either in cash or credit card. Either that or roll up the sleeves and start washing the dishes, or head off to the local gaol. But in that case, you've at least gained the albeit temporary benefit of a full stomach.
What the larger economic powers-that-be rely on is general ignorance. I'd think it's a pretty good size majority of people in this country, for instance who think that the Federal Reserve is part of the government, rather than a privately held bank. After all it's got "Federal" in the name, doesn't it, so doesn't that make it part of the federal government? No. Just as the First Federal Bank may impart again, a sense of trust and therefore credibility, it's only the FDIC (Federal Deposit Insurance Corp.) that stands to back you with insurance, should the integrity of the bank be something other than pristine. And who knows if they could really pass muster if there was a big run on multiple banks?
And this ignorance has suckered in a lot of people, particularly with subprime mortgages being the weapon of choice of late to fleece people with. If a high-powered salesman with enough charm to sell the proverbial refrigerators to Alaskan Eskimos comes at you with a sweetheart mortgage deal, the Moon included, no extra charge, how many really stopped an bothered to look at the fine print that says, in essence: "the guy or gal giving you this loan is setting it up as a 'heads-I-win, tails-you lose' offer, if you sign, you prove yourself once again the ultimate rube and we thank you, all the way to the bank. Good luck keeping that roof over your head, you're gonna need it!" And they might as well have been lined up around the block to sign up. That's the real tragedy. Because, as with any bubble, once the trust that you could either refinance, or sell to a greater fool stopped... Well, here we are then!
Of Presidential "contendas" this time around, sit back and enjoy the show, only Ron Paul is tacking a very hard reformist view economically, wanting to abolish the IRS (tax collecting agency), possibly the Federal Reserve too, (both the income tax and Fed were created under somewhat dicey circumstances in 1913 on the eve of WW-I - but that's another story...) Despite some strong Internet support I'm not sure how far his campaign can really go. My take, for the 2 cents it's worth is if we were to get a Clinton/Paul choice I'd see it be largely a repeat of Johnson/Goldwater 1964 with an historic first-and-third Clinton administration. But such is mere speculation on my part of an improbable outcome, unless the powers that be want to clear the path for the lady (and I use that term only out of deference to be polite and civil) to take the throne in the oval office. Can you tell I'm a fan? <grin>.
But, this board is not political more than it has to be so I'll cool my jets at this point... Still you asked of fiat economies and certainly economics and politics are anything but strange bedfellows.
So, the short answer is a definite maybe - as long as the con game can keep running, the music keeps playing, and the perception exists that there are more than enough chairs to land in, should the music suddenly stop. But as the mortgage holders found out, as they were dancing, the maintenance crew was clearing the chairs out for the next performance. A lot of people left holding the bag!
Best,
AIMster
Like I wrote earlier I am torn between simplifying my account as above or owning individual stocks.
Hi, TooFuzzy,
Perhaps a solution would be to limit individual stock holdings to no more than say 10% of the portfolio and leave the other 90% distributed in the fund allocations as you described. That way the potential impact of a horrid drop in the individual stocks will be limited such that you'd be likely around to live and play the game another day.
Sound reasonable?
Best,
AIMster
For tonight I have my smoked salmon spread all prepared along with my marinated herring in spicy horseradish & cocktail sauce. Jane's put up a 7 Layer Salad to take as her contribution.
Wow! Make me hungry over here!!! Sounds, as Emeril would put it, "kicked up"! Ever thought of adding more recipe pages besides the figgie pudding? Or maybe doing a cookbook?
The way to AIM is through the stomach? Food for thought! Of course too many of these Holiday parties make diet a four-letter word! But then, there's always next year, eh?
Enjoy!
Best,
AIMster
AIMster I think this will be of interest to you :
A paper investigating indicators that give alpha.
Thanks, Clive,
Looks interesting. Conceptually logical. I suppose the question becomes is there software (and enough horsepower on a regular PC) within the realm of cost affordable by mere mortals, to take advantage of it? Or is this best left for the supercomputers or, at least mainframe-class computers that can crunch data so fast the PC looks like it's frozen in time? If they mention any I'll have to read through the whole thing. :)
Thanks again!
Best,
AIMster
The problem with the portfolio increment is that it is inconsistent. Catch the next MSFT, and you will get few, if any buys, so your portfolio control falls further and further behind, the intrinsic value of the business. Invest in a risky, unproven business where the price is very volatile, we might wind up with lots of purchases, and portfolio control is growing faster than the intrinsic value of the business.
Thanks, AH!
Useful explanation. Which takes us where?
1) Lichello's recommendation of a portfolio of some solid, blue chip type firms - or what us more conservative types might replace with S&P 500 ETF's, or DIA or similar. This being part, perhaps 1/2 of the portfolio. The other part was to be reserved for more speculative and volatile parts, again we can substitute either the QQQQ's, or an emerging markets fund, volatile sectors or so on. Having each type is to increase the overall volatility such that buying events happen more regularly, but that such exuberance in so doing is tempered from becoming irrational by holding a goodly portion in solid, ongoing businesses.
2) Staying 100% invested and using something along the lines of TooFuzzy's "slow AIM," i.e., an annual, or perhaps even slightly better a 13 month rebalance, within a context of a constant ratio system. This would be an allocation-driven model, say 60% stocks, 30/30 between domestic and foreign, 20% income funds and 10% each to commodities and real estate, respectively. Very simple and low maintenance. I think a 13 month rebalance might be better as it keeps you from being too aligned with any significant group in the market for several years anyway. This rebalance could be done either by adding additional cash to shore up the positions that are lagging or performing a true sell from the profits to replenish the laggards.
3) Some derivative of the above 2? Anybody else have any thoughts on this?
Thanks again,
Best,
AIMster
I too use Automatic Investor but I can not recommend the program. It is very expensive, some of the features are not really of much use, data feeds can be problematic (currently the fundamental analysis module is broken). Most importantly, the author, Mark Hing, is totally unresponsive.
Sorry to hear you're not finding it as useful. In terms of price, look up most any similar program, or any number of investing programs and you'll see that the AI license fee isn't out of line. It's a one-time charge and that's it. Some services charge per-month subscription fees so over the course of a year you can spend several times the cost of the AI license.
I've found Mark to be responsive in general - though keep in mind that AI isn't his "day job" and I believe he's mentioned being in a very busy spot right now.
The data feed issue could be due to a revision of the format used by whatever service Mark uses to pass on to AI users. Yahoo, for instance has been known to revise their formats - break all the software dependent on it until it gets upgraded. Progress, so called anyway.
I'm curious as to what features you find not to be "of much use." There are things that can be improved - look over his board to see the "wishlist" of us users :)
Hopefully whatever problems you're experiencing will be fixed soon. I find the program to be quite robust and helpful.
Best,
AIMster
Take the cost of gasoline for example: Once upon a time it was $0.30 per gallon. Now it above $3.00 a gallon. A gallon is the same now as then. What is different is the price in dollars. Since more dollars have been created out of thin air by the government/Federal Reserve cabal, it takes you more of them to buy the same thing each year.
Partly true in this case. Other factors are supply and demand, amount of taxes on gasoline, cost of extraction and refinement, etc. But, in general, inflation is a nefarious companion to modern economic life. And if Lichello figured the rate was understated in his later versions some time ago, there's no reason to think it would be otherwise now.
So - what I'm trying to get a handle on is how periodic adjustment (inflating) the value of Portfolio Control helps the situation. Presumably the effect on this would be to trigger additional purchases. But wouldn't these be in an antithetical fashion to Lichello's reiteration of the Wall St. maxim, "buy low, sell high"? In other words, wouldn't you be buying higher (presumably to sell later even higher still)? Doesn't this shift more in the direction of the momentum players? And then what happens if we hit a selloff or realignment of prices? Won't you be left holding the proverbial bag on a several transaction's worth of stock bought not in the usual way via price oscillation against the standardized PoCo, but bought more inopportunely?
I'm not saying it's a bad thing, per se, but it seems a proposed modification that needs, for me at least, a little more "inflating PoCo for dummies" type of elucidation before I'd implement it as a policy or would recommend that it be entered into the general pantheon of AIM changes that have made the cut as useful adjuncts to the original program.
Hmmm... Perhaps if this is deemed useful, there is a way in AI software to account for this, one can set the incrementation level of PoCo with each buy transaction. So, for instance, instead of the customary 50% increase, if one wants to factor in a 10% inflationary rate, one could change the setting to increment PoCo at, say 60%. That would add additional to it, but only within the time context of AIM's self-determined buys.
So, further explanation will be appreciated.
Best,
AIMster
Not sure if I'm going to bike tomorrow, it's going to turn cooler, not expected to go over 77.
Sheesh! We should have such weather <grin>.
High tomorrow forecast to be around 26, with 6-10" of the white stuff by the end of the day. Got snow? We will, and I'm sure we'll be glad to share - if anybody feels the need!
Best,
AIMster
As a novice investor and new to A.I.M, it seems that the Newport program is the software of choice to get started but it is no longer sold or supported. How am I able to get a copy? or are the other programs that are just as good or better.
Hi, JCee,
First off, welcome! Always good to see new people here. DO feel free to ask questions - we guarantee answers! :)
No doubt others will chime in as your posting is read. First and foremost you don't need specialized software to use AIM, especially when starting out. If you've access to a spreadsheet that will do admirably. If not you can work it just as Mr. Lichello did, on paper, and there's a calculator on Tom's website which can be found here: http://www.aim-users.com/calculator.htm
It's more important to get a good understanding of how AIM works than it is to go and feed data into a program without knowing all the whys and wherefores of what it's doing. That saves you from the "black box" syndrome where you dutifully obey the instructions without any understanding.
Once you've used AIM for a while, it feels like it works for you - then adding software makes sense. Especially if you want to manage several programs, or look for likely stocks and so on. Whilst Newport is an oldie-but-goodie, and there are those of us (ahem) old enough to appreciate the simplicity and functionality of DOS originated programs, Mark Hing with Automatic Investor's developed a very functional and robust package. I've been using it for almost 3 years now and am quite happy with it. But, there are others out there and they merit consideration - see Tom's page http://www.aim-users.com/aimware.htm for more info.
Again, welcome!
Best,
AIMster
Here's a new fund with possible AIM potential, though mainly for Clive's benefit (and others in the UK):
http://www.homemove.co.uk/news/11-12-2007/innovative-investment-fund-from-strutt-parker.html
Best,
AIMster
Too bad about the 5% gaps when it does move, but that's a character of the beast.
Re: Vwave.
5% is I think within reasonable tolerance. I mean, if the former benchmark indicator indicated 41%, and this one instead shows 45% - the worst you're doing is starting off a new program with 4% more cash than you should be. Which over time, probably won't be too bad. It might work in your favor if the old one indicated 49% and this one indicates 45% - in either case the most you can be at variance between one or the other is 4%. Which I think is okay, in the long term.
Best,
AIMster
The constant dollar plan does have a inherent problem, after several cycles of stock levels when you come back to the starting level the ratio of stocks to bonds will have shifted to more bonds than stocks. This is the main reason that The constant dollar plan never caught on. Mrs. Tomlinson, said that you would need to increase the constant dollar value used in the plan, and that it was better to do so when the stock market was down.
Hi, LC,
Good to see you back around! Nice to see your board getting a bit more attention, too!
One would guess that Lichello's solution would address the problem mentioned here. That is, to use a percentage relationship rather than a specific dollar amount, using a given deviation of percentage as the signal to change.
On the very basic level, say you wanted to be 50/50 stocks and bonds. If the stock value goes up to 55% - you sell 5% of the stock value and put into bonds. Same if the bonds go up. That way the actual dollar amounts and values don't matter - only the relationship between them. On a $2000 portfolio, that's $100 either way. On a $20,000 that's $1000 worth. Simple, no?
Best,
AIMster
No critique intended - but what do you see as the attraction of HFY, EAD, PHT and DHY?
Hi, Clive,
Fair enough question. In a tax-deferred account not such an issue. It makes for a good bit of extra money that supplements the periodic amount I'm saving each month. So whilst the S&P at the present time is better in one sense, the dividends these 4 spin off are giving more immediately realized cash - which can be used, as AIM directs to purchase additional shares, which produce more income which purchase more shares, etc.
Ideally, being in NY State I can invest in municipal bond funds which are tax free at both the federal and state level, but that's one asset class dependent on location whereas these others are more universally available. Such bond funds, however are not so useful for a tax advantaged account as they're already tax advantaged! Can't double-dip, you know!
Best,
AIMster
Muriel Siebert pays 4.18% currently on ALL amounts in ALL accounts. (Actually you can choose from three different money market funds.) Folio also doesn't pay wonderful interest on cash.
FWIW,
Foliofn switched some time back from using a money market fund as a repository for cash funds to some system involving banks and I believe the rationale was that it's closer to what other brokerages do and as such they can manage larger accounts. All of this at the price of a lot less interest than what the MM fund was offering. So I asked if they could offer a fixed $1/share MM fund that pays more in interest than what they're doing now so those of us who wanted to could have this option. And with the constant $1/share price there aren't any capital gains issues to worry with.
Maybe and Real Soon Now was the response I got.
Otherwise not too bad.
Best,
AImster
Hi, Gujral,
I've attempted to distill down what's a minimal number of holdings to give reasonably broad diversification in as few a number of holdings so as to not have so large a portfolio that it never triggers AIM, or not as much as one would like for volatility.
I've got it down to 10 holdings, with a little redundancy, perhaps on the income side to give it an even number of holdings - a 'funk' of mine for symmetry - anyway, drumroll please the holdings are:
ZF -Zweig Fund - US largecap
RMT - Royce Microcap Trust - US very small cap
EFA - iShares EAFE (Europe, Australia Far East)
EMF - Templeton Emerging Markets Fund
DBC - Commodities
RAS - Real Estate (or NRI or similar)
PHT - Pioneer High Income
EAD - Evergreen Advantage
DHY - Credit Suisse High Income
HYF - Managed High Yield Plus Fund
So, based on 10 holdings, it's 40% into stocks, 10% commodities, 10% real estate and 40% incoome. Currently yields a 9.01% dividend yield
If you don't mind an odd number of holdings one could get rid of two of the income funds and place the proceeds in either the equities (50/50 split between EFA and ZF, perhaps), or increase the value of the commodities and real estate. All kinds of permutations exist.
I think, though that this gives about as good a balanced fund as one might be able to create, still risking no more than 10% of the portfolio on any one holding. One could double the number of holdings to 20 and have only a 5% risk profile, but the movements in that may be slower.
Best,
AIMster
The idea for using the (f)%cash + PC method was tailored for the 401k and IRA, where small new deposits hit the account weekly or monthly. I wanted to run 3 or 4 funds as one portfolio, for simplicity, with AIM style management for safety, but with new deposits accounted for somehow as they came in.
From the 'for what it's worth department...' using Automatic Investor, I've set up two portfolios. One has the equities in it running as a single portfolio called "Stocks" and the other I call "Cash Reserve." The amount that I add each week, being in a similarly continuous contribution mode, goes in to the cash reserve portfolio, with the allocation set to 100% cash reserve, and no stock position defined at all. Interest that the cash earns is similarly credited here.
For the "Stocks" portfolio, any dividends that they earn are credited there, creating an internal cash reserve for funding future buys. The sum of the cash reserves on the portfolio display showing both portfolios equals the total cash amount in the account. This lets me see what amount of the total cash has already been allocated to the Stocks portfolio and what remains unallocated. The benefit of doing this is that the incoming cash doesn't impact the other portfolio. If AIM asks for a buy in excess of the amount available in the Stocks portfolio, I can just transfer in the money from the CR portfolio to make up the difference. Sells are kept within the equity portfolio as well.
So basically I've got an external account which can be used to supplement the funding the overall AIM program (as necessary) and the money being added is independent to the movements of the stock value of the funds and the relationship to Portfolio Control inside the stocks portfolio.
Not a way for everyone to do this, I realize, but I've found it to be effective as a way to handle a constant cash inflow since AIM is primarily a closed-loop system and doesn't handle constant cash inflow too well on it's own.
Again, FWIW.
Best,
AIMster
They are:
A consistent philosophy
A sense of perspective
Daily discipline
Points duly noted. Thanks, TF. Of course by using and sticking with AIM's recommendations we remove the emotional component that's the bane of these useful reminders, especially the discipline part!
The only point I have with Motley Fool anymore is that it reminds me of the religiously based soup kitchens of the Depression - the soup was free, but you had to stay and listen to the sermon. (as an aside best dramatized in the original Star Trek in Harlan Ellison's episode The City on the Edge of Forever. With Joan Collins playing Edith Keeler I would easily say, "preach on, woman!") <grin>. Similarly MF's advice may be free, but darn near every article is a "sermon" as to why you should subscribe to their newsletter, each article being essentially a glorified advertisement. A shame that you have to always cut through such dross to get to the good stuff!
Sigh!
Thanks again,
Best,
AIMster
Maybe we should piggyback with this show next year:
Whew! Looking over the site info sounds like it would be a good case of information overload, though it might be worth doing just for the cachet of doing a Vegas convention. I often fantasized doing Comdex back in the day, but could never get the boss to foot the bill to send me there so never made it.
See: http://en.wikipedia.org/wiki/COMDEX
On the other hand, this image from the investment exhibit of 2007 is SO compelling:
I just can't wait to join the maddening crowd. Narf!
Of course, Las Vegas isn't without the, um, shall we say natural sights that make any such trip worthwhile... such as
Vanessa Marcil, for instance...
Still, if life's sometimes a crapshoot,
And investing gives us some food for thought as we spin the investing wheels of life
Though sometimes we may well need these of the Tibetan variety for the hope of Buddha compassion in our struggles!
Nonetheless, it might be worth it to put our heads together:
and reaffirm our AIM:
Obviously having too much fun,
Best,
AIMster
Very generally managed futures take a directional 'trend following' view, whilst hedge funds more typically hold long/short pairs (arbitrage). A problem with both however is the expense ratios of such funds - which can be 3% p.a. or more, so the appeal of DIY is high.
My question is do any of you guys runs such DIY long/short trading positions that you then overlay AIM on-top of? Or alternatively do you have any experience/recommendations for any relatively low cost alternatives that could be AIM'd?
Hi, Clive,
Good question, though I think this stuff is somewhat in rarefied atmospheres relative to where AIM usually goes. I know in the book Lichello was asked about shorting, currency plays, futures and other variants - most of which he dismissed to the person who asked the question to go forth in search of the answer as he was no longer in a position to want to search for it.
Thinking off the top, I think the closest we've come as a group to considering anything much in this sort of exotic arena has been in the area of inverse funds or multiple valued funds 2x performance and the like - with the general consensus being that these and AIM don't mix too well or that a pair of inverse plays won't work well together using one as the "cash reserve" to the other's "equity" position.
I think the considered opinion, by and large and with which Lichello would likely agree is basically AIM is what it is, for what it does with the stocks and funds that we've usually access to. Not that some management technique doesn't exist that could, on a DIY basis allow for better performance than one might get otherwise in the sorts of investment vehicles that you're speaking to. It's just that AIM (as presently formulated) doesn't seem to be the program of choice.
If anybody else has other ideas or perhaps has longer experience on this board, like you, I'll be all ears!
Best,
AIMster
Hi AIMster
I am sorry but I do not know as to what are CEFs.
Glad to help.
Basically there are two different methods of investing in stocks:
1) buy individual company stocks. Gives the advantage of making one part owner of a company. As such you can vote on some issues that come before it, who sits on the board of directors, should we do a share buyback program or not, increase the number of shares held, etc. Shareholders can take proposals to the board, such as to run the company in a more environmentally friendly way, treat workers better, etc. The downside is that all money that you invest in this company is exactly that all the money that you invest in this one company. Aside from owning multiple company stocks, there's no diversification. Your fortunes will rise or fall with the performance of the company, though AIM can help with this to a good degree. Possibly the most risky way of investing in the market, but also can be the most rewarding.
2) mutual funds. Or things close enough to them. These are where investors pool their money and have some management agent do the investing for them, or, in the case of ETF's buy a group of holdings to match a specific index. The general idea being that more people together can invest in more holdings than all but the richest among us. Best result is diversification across all sorts of parameters. Not so good is that the investment decisions, what to buy, hold, or sell, is not in your hands but in the control of the management team. Along with their management, since they don't do such for free, come fees and expenses, ranging from very low for ETF's as they're only matching to an index, not using any analytical methodology to put 'spin' on their fund in the hopes of beating the market return. Some few do, most don't. At least with any consistency.
The #2's come in 3 basic flavors:
a) Open ended funds. These are mutual funds run by various investment firms, like Fidelity, Vanguard, American Century and so on. They create and redeem shares in their various funds based on investor demand, and will add to or sell their holdings depending on whether money is overall coming in, or going out. So things may or may not be sold at best advantage. Also with these types of funds are two general classes, load and no-load. Load are the more expensive of the two, charging a commission historically around 8% or so for the privilege of investing in their fund by paying people to sell it to you. As there's been no demonstrable evidence that I'm aware of that load funds consistently outperform no-loads, you'll save yourself quite a bit sticking to the no-loads.
b) closed-end funds or CEF's - unlike their open-end cousins, the CEF's issue a fixed number of shares and these trade on the stock market like stocks or ETF's. Since the value of the shares is governed by what the market is willing to pay, these will often trade at a premium or (even better for our purposes) a discount to the net asset value of the holdings that the fund has. Thus you can buy into a fund at a sales price, if the discount is in effect. As TooFuzzy mentioned a couple back, these can have varying methods of generating their sometimes high dividend payments with the not so nice method of returning your own capital to you, but they don't have to do that and can return bonafide earnings, at least when they can.
Both of these can subject you to capital gains distributions which may or may not be a good thing, particularly if your account is taxable.
c) Exchange-traded funds are the proverbial new kid on the block, though they've become quite an investment contenda in their own right. These involve blocks of holdings that are mirrored to some index - and new ones seem to be getting created like mushrooms after a good Spring rain. As they tend to mirror the index, they are far less likely to produce capital gains, and again, in that performance often one has to pay significantly smaller fees that one would for either a or b type funds. An article that goes into the process of ETF's can be found here: http://finance.yahoo.com/etf/education/01
The general debate between the types is the discussion between active or passive management, with some academics, notably Fama and French coming down strongly on the side of passive investing. How well their academics play out in the real world continues to provide fuel for the debate. Open-end and CEF mutual funds are largely active investing tools, ETF's passive, just replicating the performance of the index.
Both b and c are more expensive to own in that one must pay a brokerage commission for each buy or sell. Open ended funds can be invested in directly and you don't need a brokerage account to do so. On the other hand, some of these can be invested in through the brokerages so at FOLIOfn, for example, one can have a folio of individual stocks, open ended funds, cef's and etf's, all of which have no commisssion or other charges if traded in their windows and they aren't in the smaller "tier 2" list. Likely other brokerages offer similar arrangements, though likely at a per-transaction cost.
Wow! Before I get you TOTALLY confused perhaps I should end this here so you can digest it a bit.
Please feel free to ask any more follow-ups!
Best,
AIMster