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Yes, it does all come down to the specific investment. If you believe America is going in the right direction, you want to AIM U.S. companies. But, if you think America is plunging into socialist hell, you will want to AIM foreign companies, CEFs, or ETFs.
Several ways to buy stocks at a discount.
First, are closed end funds. Some deserve to sell at discount, lousy performance, high fees. But, at times, well managed funds sell at good discounts. Currently, PEO is at a 15% discount to Net Asset Value.
Secondly you could do covered call writing or naked put selling, to potentially acquire most, heavily traded stocks, at a discount.
It's absurd that taxis should be a state sanctioned monopoly. Ultimately, these medallions won't be worth much. But since New York just elected DeBlasio as Mayor, they will probably be valuable for next few years.
If we allowed free markets to operate in our large cities, taxis would be much more affordable, as they are, in many smaller cities.
Been a while since I saw the book, I think it's conventional AIM.
Biggest caveat is how the author selects stocks. He looks for stocks at yearly lows. That's what I did as a novice, it was a disaster. While there are bargains in that group, there is even more trash. There's a reason for most of those stocks to be selling at lows. If anyone wants to follow Weber's method, do a lot of research, before beginning a program. AIM will not help you, if you're investing in a failing company.
No one can currently project what the revenues and costs of ACA will be in 2014. It's a huge operation, which means we're facing unprecedented uncertainty with regard to the deficit and National debt, not to mention, how does this mammoth program affect the economy?
But Obama is not satisfied, he wants to use his momentum from re-election, to push for amnesty to illegal immigrants. How much will that add to our costs? If you think it will be positive for economy, where is the proof?
My foreign investments have done well, and I sleep better at night, than I would, if I were invested in U.S. stocks or government bonds.
ls,
Not all countries are still expanding their government scale of operations. Canada and Norway, for example have actually shrunk their federal governments as percent of GDP.
In any event, my anti-U.S. portfolio has done well. Basically, I'm investing in natural resource companies, and operating companies outside of U.S., including foreign real estate companies.
While many countries will try to depreciate their currencies, to boost exports, the U.S. dollar is going to depreciate, simply because it will become too difficult to finance our soaring debt.
If I sound like a goldbug, it's because I've become a gold and silver believer. In my opinion, you can't go wrong with copper, an industrial necessity, and not abundant in the world.
Haven't posted in a while, but am so pleased with my results over past several weeks. Using several strategies, but basically I'm investing on the theme that U.S. economy will lag the rest of the world for quite some time, and the dollar will underperform as well. Thus, other than some natural resource stocks, I'm invested in international equities only, with just a very small amount in international bonds.
As long as the U.S. continues to print money, and increase its national debt to truly stupendous levels, I see no way for the economy to grow. GDP figures show small growth, but virtually every month, the figures are revised downwards. There is no growth.
Nice to have cash, but will wait. Americans made a stupid decision yesterday, and interest rates are near zero. But I'm waiting for lower prices before investing.
Took advantage of some strong market days to raise a great deal of cash. Always love that position. I'm torn as to where the market goes next. If it continues to rally, I'll make money, just not as much. And, if it retreats, I'll lose money, just not as much. But, I will be able to employ all that cash in better opportunities.
The unemployment rate released Friday, was an obvious erroneous measurement. I see from many sources, that the report could not have been manipulated by the Administration for political purposes. I guess I'll have to accept that. But it is one heck of a coincidence that a report with an error of this magnitude, comes out a month before the election, and boosts the re-election chances of the administration.
I still lean towards a weaker market next week, as the market digests the employment numbers and reflects on what a 2nd term for Obama means. The bullish case, is stil, alternatives don't look good either. Interest rate remain at zero, global economies are largely weak as well.
A health care stock, I do like, is PRGO. However, it doesn't really look like a contrarian stock pick, and may never be, it has had an impressive track record. But the short interest is high, and if the market weakens, PRGO might become more attractive.
The problem with this sector, is that there is going to be massive regulation and taxes imposed by the federal government, and it's impossible to know what things will look down the road, even in a year or two. You could invest now, and wait until things are more certain, before cashing out. The problem is that big players will know well before you, what is coming.
PRGO should do well regardless, as a manufacturer of generic drugs, they should be able to capitalize on the demographic trends, as well as be favored by government panels.
Praveen,
I agree that the demographics favor health care stocks, I'm ahead of you in the ageing curve, and that's part of my problem. I'm avoiding health care stocks, at least directly. It's the politics that concern me. The so=called ACA places penalty on health care insurers that don't pay out a high enough percentage of premiums to providers. That smacks of defense department kind of accounting, and will result in higher costs, not lower costs. It also means that there is no financial incentive for insurers to lower costs beyond a limited range. Similarly, device makers are subject to a new tax, drug companies are going to find that they have little ability to negotiate prices, with basically just one buyer. Regardless of how the election turns out, I'll sit it out.
If I see a free market approach may be taken, and a sector gets beaten down, I'll take it. But till then, I don't see any health care stocks that can't potentially be taken down to zero. Insurers are the least loved, politically. If ACA fails, and Democrats remain in control, I'd expect a single payer system, and insurers would appear to be worth zero in that case. Do you know what happened to insurers in other Western countries? Not a rhetorical question, I don't know the answer, but I suspect that it's not a happy one.
I also am not a fan of much of conventional medicine. I see the federal takeover, an establishment of conventional medicine. I'm in a medicare advantage plan, like a quarter of all seniors. My plan will be cut next year (conveniently after the election). If I were to want to see an Ayurdevic provider who lacked western medical credentials, I'd have to pay out of pocket, in addition to any premiums for health care.
The most attractive health care stocks to me, then, in the interim, would be those, who derive most of their profits outside of the U.S.
The travails of trading illiquid stocks. I held 700 shares of a CEF that has made me a nice profit recently. Since the discount had narrowed quite a bit, I placed the shares for sale, I was able to sell only 100 shares a few days ago.
Today, I again, placed all remaining 600 shares of the fund, at a little higher price. My first sale was for the grand total of 1 share. I would have demanded that this sale have been commission free, but ultimately, I sold another 100 shares. Eventually, I sold all of the shares, but never for a lot greater than 100 shares. So, it's nice to make good money for a quick turn in an illiquid stock, but generally, I prefer more liquid stock.
Praveen, this is actually a plus for you, your system at your levels, would not encounter much difficulty in trading such a stock.
Praveen,
I would respectfully disagree with you that the odds are very likely that Obama will win re-election. Actually, I think that Romney is slightly more likely to win re-election. Given that I don't feel Obama has succeeded in anything he has attempted, that is a little disappointing to me.
As for Fisher's analysis, that assumes that Republican and Democrat Presidents are fungible. There has been no President anything like Obama. So, I'm actually expecting Romney to win by a large margin.
But if we get close to the election, if it does appear that Obama will win, I expect the market to tank. The problem for investors, will be to find any possible place to hide. I don't see such a place. Almost all Western democracies have adopted socialist policies, and their economies are in decline. A possible approach is to invest in developing nations that are still more heavily into developing capitalism. And that's probably where I'll be putting my money, if I decide that I'm in error about the election.
Of course, I think you are a Chicagoean (I'm actually a native of Chicago, but moved away as an infant) and you may well hold a different viewpoint, and that's okay with me. I appreciate your view and opinion.
Read an analysis today of sectors, that concluded that the market expects Obama to win re-election. I don't agree. The market is strong because there may be a new White House occupant in January. If there isn't, it's hard to see a catalyst that could maintain the market's valuations. Certainly, the Fed has done all it could do to keep interest rates at a zero level, so anyone who wants to make more than 2 percent, almost has to consider the stock market.
I see no sign that Obama has changed his views about economics. The next four years may well be radically different than any other 4 year period in our history. This might well be a great time to be in cash, but I'm not, at the moment. Tomorrow, I may try to raise a little more cash.
If Romney wins the election, or better times ahead? Not necessarily. The federal government has expanded in size and scope, during all recent presidencies, Republican or Democrat. But, at least, Romney has some familiarity with the private sector. The economy should grow, but it's long term health is dependent upon what corrective measures are taken.
Hi all,
Been gone from I-Hub for a while, and have just read some old messages. I'm doing well, and am enjoying the recent runup of stock prices.
I changed my phone and internet providers, and some of you have been unable to contact me, and I'm not a premium member of I*Hub, so I can't contact you. If you will message me with your email address, I'll get back in touch with you, and let you know what I'm doing these days.
Next week, if market continues to advance, I will probably increase my cash balances, which is a little less than I'd like with this kind of rally.
We are in an election year, which is normally bullish. This election though is a potential watershed, the economy is not showing much signs of life. I won't be surprised to see the market tank in the next few weeks.
Praveen,
I am heavily invested in natural resources. They're getting clobbered in the markets now, but I feel that they will be great investments. Not only because of systemic inflation, but the fact that supply is unlikely to keep pace with demand once globall growth resumes.
Unless the world enters a great depression, I expect to do well.
For a contrarian, lots of good signs. The average investor is fleeing equities. Charts do look bearish, a lot of economic data is discouraging.
On the other hand, many U.S. corporations deleveraged during the recession, haven't reloaded, are profitable at current GDP levels. Interest rates are at zero. Looking out 3 years, can Treasuries possibly outperform equities? I wouldn't think so, but I'm not the brightest bulb in the package, maybe I'm missing something.
Financially strong, successful companies would appear a no-brainer compared to the anemic yields of Treasury bonds. We could see some modest earnings growth, even without much growth in the economy. That's the way I'm playing it. Has always worked in the past, maybe this is the one time, the world is truly ending.
Praveen,
I'm upset at myself for not being more disciplined, a chronic failing. Actually, my methodology allows me to make adjustments during market declines, that raise cash and reduce my overall risks. I put on too many positions in too short a period of time. I have raised some cash, however. How well I fare, depends upon how quickly the market rebounds. I am endeavoring to become more disciplined. At my age, I should have fewer positions outstanding.
It is disturbing to note the growing economic illeteracy of Americans. no wonder, we are well on our way to becoming a European styled socialist state, though most Americans would insist that they aren't socialists.
But they seem to think the government should play a greater and greater role in promoting 'fairness', and that businesses can't be trusted and are the source of all that is evil.
But today, I just want to treat one of the 'urban myths', that I hear over and over. America doesn't make anything anymore, greedy corporations have transferred all of the manufacturing jobs overseas. This is universally believed. In fact, the U.S. manufacturing output is as great as ever, we are one of the largest exporters of manufactured goods in the world. But we are manufacturing far more efficiently, with much less labor. For heavily unionized rust belt communities, jobs did go overseas to countries that could operate plants more efficiently.
But the economy is also far more diverse today, software is a major player, that barely existed thirty years ago. Other industries have seen labor forces shrink from improved productivity. IN colonial times, agriculture was the principal occupation, today, it is a very small number of people producing gargantuan crops.
Many decry the 'unfairness' of international trade. A concept, 'comparative advantage' is found in every economics text which explains the benefits, is nowhere to be found in the popular media accounts. We are all enjoying a higher standard of living today, due to the results of international trade. Are there some things that could be done better in our various trade agreements? Of course, but that is true of everything our governments are involved with.
To paraphrase Reagan, business isn't the problem, government is. If the government really wanted to create jobs, it would reduce taxes and overly restrictive regulations on businesses. The alternative is to create make-work government jobs that will actually impair our quality of life. Does anyone really think that a government agency is going to produce I-Pad types of innovations
The last few weeks have been humbling. My peak portfolio value was at the end of April. The ensuing selloff depleted my portfolio somewhat, but then it came back, and I was sitting pretty with some large cash balances. The last 3 weeks have been brutal. I invested the cash too soon. Will I ever learn. The last 3 days have helped, but a long way to go, to get back to the end of April numbers.
"Cutting government spending right now will reduce demand. The time to reduce the deficit by spending cuts will be after the economy recovers out of recession"
Praveen,
I suspect that we are all somewhat vulnerable to our individual political beliefs, myself included. But, I will try to explain why I disagree with the foregoing. History has shown, case after case, that free markets channel resources more efficiently than central government planning. Our federal and many state governments, have in the last century, grown exponentially, and are way more intrusive and inefficient than desirable, and in opposition to how the U.S. constitution was originally interpreted.
Now I'd love to see government spending 'cut'. But for all the hysteria in the news, no one is actually talking about reducing spending. What is in question is how much of the budgeted increases in spending over the next ten years, might be reduced. I think this can be done, and the economy won't be harmed. Now if you are the beneficiary of government monies, you'd be harmed and you would need to find a new source of revenues, just as people in private busineses need to do every day.
Our gargantuan government is shifting the playing field to favor large corporations. Increasing regulations creates an economic moat that helps protect these dinosaurs. If we want to see a robust economy that creates jobs, the solution, to me at least, is clear- cut taxes and onerous regulations. Don't require California hotels to use fitted bedsheets, for example.
In the meantime, I see permanently high unemployment rates and a slow growing economy as long as Americans favor European style socialism. And I pray that one of the solutions of this new super panel, is not to start some ambitious job training programs. The idea sounds great, but all such previous programs have been boondoggles.
There are probably not as many contrarians as there are investors who think they are contrarians.
Take stock selection for instance. How does the average investor select stocks? Chances are high, that they are selecting stocks that they have read about in the media, or saw a money manager touting them on CNBC, or read an analyst report in Barrons or the like.
These are all examples of sheepish behavior, not contrarianism. Call me cynical, but many media stories I feel are intended to misdirect you. IN any event, by the time you read it, most of the investing world already knew that information and it's in the price. The same could be said of an analyst's report. Indeed, I like buying stocks after they've been downgraded (provided other data is supportive) or selling after they've been upgraded. As for what money managers are suggesting, let me say I'm especially sceptical. Are they really telling me what they are currently accumulating? If so, it would seem a disservice to their clients. More likely, they are telling me of stocks they have a large position in, and would like to trim their holdings. If you'll buy some, you'll help them out. They do believe in these stocks, just not at current price levels, they'd be buyers again at lower levels.
The best bargains may be quiet stocks that aren't attracting any attention. Another may be the stocks that everyone hates, they may well be oversold. If they aren't terminally ill, these stocks can be great investments, but most investors will be scared away.
Hi Tom,
Thanks for the kind words. Didn't mean to be such a 'basher'. I rarely post here anymore as I don't AIM my investments. But I find this to be one of the most civil and constructive investment boards, and have continued to follow the board all these years. I have spoken to several others who used to post here, none still AIM, but have adopted their own methodologies that incorporate some AIM themes.
Indeed, I also know many individuals who woould have fared better with AIM than their own seat of the pants methodology. At market tops, the news is almost wholly bullish, inducing participants to go 'all in', maybe even using margin, or buying call options. AIM would have told them to take some cash off of the table instead. At market bottoms, the news is almost all negative, end of the world stuff- many cash out. I know many who still brag that they don't have any money in the market, they can't lose, but they can't win either.
I don't think Lichello spent hours with an EXCEL spreadsheet, I think he spent some hours with a four function calculator. The basic premise is sound, buy stocks when prices are relatively low, sell them when relatively high. I think one can develop a more optimal system of their own.
But as you and others have shown, you can earn good returns with AIM, if you use commonsense in constructing your AIM warehouse. If you're choosing low priced stocks at their 52 week lows, and know nothing else about the stock. I fear that you'll be disappointed. If you're selecting financially strong stocks, or good ETFs, you'll likely be happy with your results.
I don't post much on I-Hub, as I don't care to share all of my methodology. I do post some on my 'Contrarian' I-Hub board, and on Praveen Puri's 'Stock Trading Riches' Board. But I enjoy reading this board, and seeing what others have to offer.
I think many could benefit from the approaches given in Mebane Foster's 'The Ivy Portfolio', which I learned about from this board. Rebalancing different asset classes, works much as the basic AIM algorithm.
Hi all,
Hope ya'll will welcome a Devil's Advocate here.
"In spite of the initial purchase being close to a market top, the overall portfolio performance is not bad."
I disagree with this conclusion. In fact, pro-AIM articles almost always start with being close to a market top. The overall portfolio performance is not bad, not in spite of the timing, but because of it.
Imagine, if you had started at the beginning of one of the major bull markets. You would have steadily fallen behind the buy and holder. Worse, you would be steadily selling shares and falling even further behind, waiting seemingly forever for that bear market.
You start with a 50% cash reserve, Lichello's last edition illustrated an 80% cash reserve. If you know in advance, how big the correction will be, it would make it easier to decide how big a cash reserve to establish. But in that event, I'd opt to go with a 100% cash reserve.
You give a 2% return on cash reserves and deposit dividends to cash reserve. What have you done on the buy and hold shares? Are they reinvested?
I enjoy Lichello as a writer, I have several of his books. I doubt that he was as successful as an investor as he was as an author. AIM does permit one to avoid the worst possible drawdown, but one is also exempting themselves from the best possible gains. That some here have done well over the years, is a testament to their portfolio selection, not the methodology. With a computer, I think almost anyone could vastly improve upon AIM's algorithm.
AIM has no concept of time. Stocks don't become more valuable with time (in real life, they do, but not by AIM's logic). Sell targets remain until a transaction is triggered, even if years elapse. Over time, you buy a lot of shares in stocks with large drawdowns, but you are mainly in selling mode for very strong stocks. I invest in stocks, because I expect them to spend more time going up, than going down. AIM's algoritm treats it as a 50-50 proposition that the market goes up or down. Furthermore, AIM regards the market as irrational. If a stock declines 50%, AIM says the stock is a bargain, and deserves more cash than a stock that declined only 10%. Well, the market is frequently irrational. But a 50% decline, may be a perfectly rational devaluation based on the fundamentals. That 10% decliner, may be a far more investment worthy stock, deserving of more cash, not less.
Still, I agree that AIM is better than no plan at all. The typical investor incurs lots of small gains, and a few large losses and manages to lose a game that should be won. I've known many persons who have done well over the years, just investing in mutual funds, and never touching them. I've corresponded with several people who blew up, AIMing highly volatile stocks. After all, AIM loves volatility. Unfortunately, at least a few very volatile stocks are destined for pennyworld, or zeroland.
TF,
I take what the market gives me. I will do a covered call, buy a call, sell a put, or buy/write a spread, whatever appears to offer the best risk/reward opportunity. I own a couple ETFs, I have had some puts where I chose to have them exercised. If I were to name a favorite strategy, it is to sell puts, but, I am involved in buying/selling both puts and calls.
I liked Lichello's books, but he was a better writer than an investor. I prefer an approach more like Mebane Foster's 'The Ivy Portfolio' which had some threads over on the AIM board. The biggest problems with AIM, are that you wind up investing all of your monies in stocks with large drawdowns, while you sell too many shares of the best performing stocks. Sometimes that works out, often it's the reverse of what you should do.
Still, if I really believe in a company, I will buy more on a market pullback. Even a great company's stock can become overpriced, in which case I will probably sell out completely, rather than just a little. But I do invest somewhat like AIM. However, I will put on a position, even if the stock has climbed quite a bit, if i think the fundamentals support a much higher valuation. I trade more frequently than a typical AIMer.
Hey TF,
I don't AIM. As I have frequently posted, I don't think AIM is a very good system, though it certainly may be better than no plan at all. I've corresponded with several folks who blew up using AIM on very volatile stocks, that sucked up all their cash reserves but continued to decline.
My system is AIMlike, in that I'm not opposed to adding to positions when prices decline, or taking some monies off of the table when prices go higher.
I don't actually own many stocks, most of my positions are established using options. My downside risk is partially hedged, so I tend to not have as large a drawdown as a stock investor. Additionally, I currently have a large cash position, but am not adverse to putting it to work, when I think I have attractive opportunities. Being retired, I am somewhat more concerned with the return of my money, than with the return on my money (per Will Rogers). That said, I have done very well the past couple of years, and am the most comfortable financially, that I have been for many years.
Hope you are faring likewise.
Nothing like losses to focus the mind. May was a disappointment, took a small loss after a long string of monthly gains. June has been worse, though the last 3 days has brought me mostly back.
Could the market be more manic/depressive than the past several weeks. We were facing a worldwide depression, now the economy appears to be growing, even if at an anemic pace.
I'm open to whatever is coming. I'm not smart enough or with adequate resources to know which of the experts is correct, if any of them are. I expect that the developed world will continue to grow, albeit, at a much slower rate than the historic norm. This is simply a result of pretty much all of the Western nations continued move to a more socialist political economy. Instead of vibrant entrepreneurial economies, we will see economies, largely controlled by large central governments, large corporations, and large labor unions. But much of the developing nations, will grow rapidly.
A major theme of my portfolio continues to be natural resources. Whether we reenter a recession or not, I expect the future will create demand/supply inbalances in many resources. Whether we have a reduction in demand for a quarter, two, three or four, it's crazy to discount resources in the ground, to the extent that we have. So, I'll continue to add to my holdings. But I maintain a sizeable cash position, should the market bears regain their command, and will hedge existing positions.
Living in a retirement community, I hear many people brag about how they have their money safe, and won't risk any in the stock market. They may feel safe, but they may be at great risk. Inflation isn't licked, in my opinion, and today's low rates make fixed income investing a nonstarter. I still believe you need equity exposure, whether retired or not, at least in my humble opinion. Certainly the last couple of years have been great for me, and I'm delighted that I didn't seek the safety of bank CDs.
We've had a nice run of almost daily gains. My portfolio values have swollen. I'm feeling like a genius. Past experience has taught me that this is a dangerous state of mind. I've raised some cash, and would look to raise more in the coming days. It's not that I'm predicting a stockmarket crash, it's that I think I see complacency in the marketplace, making it vulnerable to a crash if any of many possible catalysts materialize.
The biggest factor is my own mindset. Raising cash, gives me a chance to sit back, and view the landscape, take my time to discover my next investment opportunity. If the market continues to rise, I will profit, not just as much as if I had been fully invested. But should it correct even modestly, I'll be in good position to redeploy some capital.
TF,
Yes, both producers and users of natural resources, frequently hedge the prices using futures contracts and the like.
On the transportation side, I don't know why anyone operating big rigs doesn't convert to natural gas as a fuel, the savings are substantial. Some trucks are commercially available that can run on both diesel or natural gas.
If the environmentalists don't shut down nat gas drilling, it's got a bright future, whatever happens on the oil front. Technology is developing so fast, it's hard to tell what's coming down the pike next.
I assume CAER is a European stock. The name sounds ominous to me for a stock. Caer is a Spanish verb meaning to fall, or collapse. Not a trait I look for in stocks.
Natural Gas continues to be unloved. Oil prices continue to spike, while natural gas gets cheaper and cheaper. The U.S. is totally dependent upon hostile, unreliable foreign sources of oil, while it has huge supplies of natural gas, that the government just ignores.
Natural gas is still a sizeable part of my portfolio, I'll continue to build my investment in the sector, it may take a few more years, but, ultimately, we have no choice but to take greater advantage of our bounteous supply of natural gas.
Ugh,
Gotta stop watching Television. Saw some liberal tonight explaining why the fact that so manypeople are unemployed, is that businesses are sitting on cash and not hiring people. No consideration was given to the fact that people generally don't start businesses just to create employment. Profits are the desired goal, and hiring necessary labor is just a means to an end. If government creates barriers to entrepreneurial success, one should not be surprised that employment stagnates.
Of course, the government can always hire, and it has been doing so. Anyone who thinks that that is the answer to prosperity, has been ignoring over a century of history.
But lots of Americans seem to buy into the liberal theology. Where are they learning these ideas, that are totally unsupported by any objective analysis?
50-50 CER and price movements
In my opinion, one of the flaws of the AIM algorithm is that it views that, prices are as likely to go down as up. That might be somewhat true on an hourly basis, but over longer time periods, stocks tend to go up about twice as much as they go down. That's why we are investing in the first place, we want to make money. If stocks were as likely to go down as up, we'd be gambling, and would have more fun in a casino.
Now AIM works better than B&H in a bear market, but generally underperforms in a bull market. No free lunch there. Personally, I despise holding cash, though at times, in between trades, I hold a lot of cash, waiting for an opportunity to employ the cash in more lucrative ventures.
In my view, AIM is better than buying and selling stocks with no plan. But AIM was constructed by a man who was a better writer than he was an investor, and it can be greatly improved as an investment strategy, and I think, many here have done a lot in that regards.
I definitely don't like adding 1/2 of buys to PC, and would prefer to periodically increment PC over time, such as 6 or 9 percent per year. What the AIM algorithm does, is overallocate capital to stocks with frequent large declines, while underallocating cash to superior investments, that are in long term advances, and shallow declines.
(OT) TV, what in the world is going on up there in the People's Republic? Rioting in the streets, schools are closed? 14 state senators have fled the state and have sought political asylum in Illinois. Is Madison the next Cairo?
Surprised the developments in Wisconsin haven't yet affected the stock market. Perhaps, we'll see the Dow down tomorrow morning.
Adam,
If you were AIMing INTC from 35, you should have had some additional buys, unless you started your program with zero cash reserves. I'm inferring from your post that you ran out of cash long before INTC bottomed.
I've sometimes pondered if AIM couldn't be improved by helping it preserve cash in severe downturns. The irony is that these downturns were what motivated the creation of AIM in the first place. The problem is that no one knows how deep a downturn will turn out to be. So, my idea is to use a 200 day moving average. Make no buys when the price is lower than the 200dma. An alternative is to say that one buy can be made below the 200dma, but no more until price is above 200dma.
INTC has made a decent move from the bottom, but that only helps if you were able to buy shares near the bottom. There are also dividends, that could have been used to purchase additional shares.
I don't AIM but mechanical investing systems have interested me for some time, and they are part of my investing system. I don't currently follow INTC, but as you say, they are an important company, with a decent dividend yield. Best of luck with it, I suspect that you will see better returns ahead with it.
Adam,
Just wondering why INTC is a 'dead-beat' stock. Their chart seems typical of a lot of stocks. They dropped big in 2008 but have had a great run in 2009 and 2010, almost doubling since their lows. Seems like a great stock to have been Aiming, particularly since they pay a dividend, current yield is a not paltry 3.3%. Indeed, I imagine, if one had reinvested dividends, they'd be ahead of their 2008 highs. Indeed, Aimers, sometimes seem to overlook dividends, as they are ignored by most Aimers.
Didn't look at your other dead-beats, but maybe I'm missing what you are trying to say.
TF,
Firstly, most of my positions involve being short call or put options, which are a partial hedge to a downturn. So, in that respect, my portfolio is a little less risky than an all-stock portfolio.
My 'Reserves' correspond to AIM's cash reserves, but they contain no cash or bonds. Because they cover many asset classes, they will not all go down together, or at least down to the same degree. The reserves also, in effect, have a stop loss, so that if we face a severe downturn, I will have a fair amount of cash to invest in cheap stocks at the market bottom.
Since, my overall thesis, is that we will see a continuing strengthening of the economy over time, higher interest rates, and further inflation in commodities, that's the way I'm investing. I'd rather put my money in stocks offereing potential for high returns, than to put them in bonds, which will be net losers over time.
I think the odds are with me, but as always, nothing is guaranteed, I monitor the markets every week, and am always tweaking the portfolio. My systems are only about 70% mechanical, and abut 30% discretionary.
TF,
Are you busy with tax season starting?
I don't even hold short term bonds, though I agree that I'd be more likely to hold them than longer term bonds at the moment. There are closed end funds that invest in convertibles, but they trade more like equities than bonds.
I'm looking to maximize my portfolio gains, even though I'm retired. Over long time periods (hopefully, they are in my future), equities tend to way outperform bonds. I have several means to address a major correction. I'm diversified over a number of asset classes, just not any fixed income assets. I have sometimes invested in convertibles, and floating rate funds (loan participations).
the last two years have been great for me, I am certainly following the markets closely, and will become more defensive when conditions warrant. Most of my income comes from the sale of options, which also serve as partial hedges.
Why is anyone holding bonds? My feeling is that bonds are a clear loser. The seeds of future inflation have been sown for some time. When those seeds sprout and lead to the harvesting of an inflationary crop, is what is unknown. This is not a contrarian view, almost all experts acknowledge that bond yields must rise sometime in the future, and when they do, bond values must correct.
Yet almost all financial advisers recommend that people allocate a percentage of their portfolio to bonds, to dampen volatility. Especially for us older, retired people.
I hold no bonds, and don't plan to, anytime in the near future. There are other avenues to follow- hold a number of different asset classes, especially those which may be expected to benefit from inflation, whether mild or not.
I expect at least a mild correction from equities, they've run so strong, and there is a lot of complacency manifested in the market. But earnings are rising. Companies are so lean, that any improvement in the economy is going to the bottom line. People who are awaiting better economic news, have missed one hell of a bull market. By time, everything is lining up favorably, and the unemployment rate has fallen to below normal levels, it will be time for a rip roaring bear market.
Steve,
I've considered a stop loss for some time. It's recommended by most trading publications. If one is trading with a lot of leverage, it makes sense. It could be the difference between success and failure.
But I use little leverage. If I have conviction that I'm investing in great businesses or sound economic interests, then I want to be exploiting lower prices, not retreating from them.
Besides, if you let an automatic stop loss take you out, when do you know to go back in?