AIM/Anti-AIM
While I find talking about and knowing about individual companies, I have been burned too many times.
I have a long term paper record for a S&P AIM, monthly reviews, but using inflation adjusted price (price only, excluding dividends).
Analysing the AIM trades to be all virtual and only buy stock when AIM indicates a buy, selling that stock when AIM indicates, until zero stock remaining ... and repeating and then collating all such trade activity since 1876 I was able to assess the overall AIM trade activity across those years.
There were 9 distinct sets of AIM having initiated buying and then later having sold all those shares, the 9th is still active/running.
What is apparent when looking at those 9 separate runs, assuming the current run was closed out at current/recent levels, is that AIM trading results has had a degree of correlation with stocks. It performs better when stocks perform well, not so good when stocks perform poorly. Looking at Anti-AIM i.e. being the complete opposite to AIM trades, buying $1000 of stock when AIM indicates to sell $1000 of stock, selling $1000 of stock when AIM indicates to buy $1000 of stock, would have provided a degree of inverse correlation and reduced overall risk - but equally reduce reward during times when stocks/AIM did well.
For the most recent run that started in September 2001 standard AIM would have served considerably better than Anti-AIM. In contrast for the run starting November 1929 Anti-AIM would have been vastly superior to AIM, reducing a -16% annualised real loss over 3.5 years into a 2.27% annualised real gain.
Of the two, AIM provided the overall higher reward, around 7% average real annualised compared to 3.5% for Anti-AIM. But that higher reward came with greater risk (volatility).
Buy and hold is a form of Anti AIM. As prices rise you continue to hold (relatively higher) stock exposure, as prices decline you hold less. A reasonable choice might be to blend both AIM with Anti-AIM which when 50/50 is somewhat like AIM-HI. i.e. allocating some cash reserves, but not too much such that cash is exhausted relatively early into a potential big down-run. Not selling too much stock when prices are rising. Whilst not holding too much cash that its drag factor is more pronounced compared to when smaller amounts of cash reserves are maintained.
I know some suggest that Lichello was swayed to increase stock, reduce cash due to the 1980's/90's boom, but I'm not so sure that was all simply 'greed' motivated over that of better diversification/risk reduction.
For individual stocks, Anti-AIM is often the better choice, cutting losers, running winners. As they tend to have more extremes of both. For broader indexes/funds AIM is often the better choice - anticipating a degree of mean reversion (if one stock index consistently outperformed, then investor would be swayed into investing in that index alone).
