A.I.M. Users Bulletin Board

[ls7550]

With Inverted AIM this is automatic. It feeds the dividends back into the market, not by reinvesting dividends when received, but reinvesting using the Lichello algorithm

Nice! Instils even better 'human behaviour'

Fundamentally the real and perceived stock investment worlds are quite markedly different. Investors look at perhaps something like 10% longer term nominal gains from the Dow total return, mentally discount a 4% historic inflation rate and deduce a 6% net real reward.

Three factors however drastically differ actual and perceived. Dow and Jones for instance devised three indexes, the Transport, Industrial and Utility averages, of those the most successful has evolved and become the more common reference for the 'historic average'. I'd guess that with 'survivorship' discounted actuals are perhaps 2% lower i.e. 8% had you invested equally in all three indexes (without the benefit of hindsight).

Discount taxes and costs of perhaps 25% against the 8% nominal gains and that's another 2% hit.

Discount investor behaviour and that's perhaps another 2% hit. The tendency for investors to be greedy/fearful, buying after large gains are apparent in anticipation of such gains continuing, selling after disappoitment.

Collectively actual real rewards might be closer to 0%. Applying relatively simple ruies however can improve upon that...

Utilise tax efficient accounts whenever possible. Look to keep costs low.

Indexes are in effect the best choice of mechnical investment method known and tend to have lower costs.

Use AIM to avoid bad human behaviour (look to add when low, reduce when high)

... and instead of 0% net real you'll be more inclined to achieve a satisfactory overall outcome.

Others might look at your actuals and say - they're no different to the historic average, but fail to recognise that in practice the alternatives often drastically lag that average.