One thing about AIM-HI is that the minimum transaction is at least as much as the SAFE amount. With the AIM-HI explanation in the book, both the SAFE and the minimum transaction amounts are 10% of the Stock Value. However, the last book edition was published in 2001 and probably went to the printer before 2001. Mr. Lichello had seen a great bull market that ran from August, 1982 until March, 2000. I am sure that he was influenced by that long running bull market.
The example he gave in the book on page 260 was using the Vanguard Primecap mutual fund....a 'diversified' mutual fund. Even in his example of Vanguard Primecap there were no actual purchases or sells...only a cap gains distribution. I am not quite sure why he chose that particular fund or that particular time period (January, 2000 through September, 2000) for his example.
Anyway, by using the results of the 2001-2002 bear market, I have done a little backtesting of individual stocks, sector ETFs and 'diversified' mutual funds. My results were that if we have another similar bear market then AIM-HI probably has an 'adequate' cash amount for a 'diversified' mutual fund (20% of the total account, which is the same as 25% of the stock value). A large number of 'diversified' mutual funds declined no further than 30% from their highs and AIM-HI could accomodate that sort of decline, especially with its minimum transaction amount requirement of being 10% of the stock value, the same amount as SAFE.
However, some sectors, like biotechnology or semiconductors, are very volatile and a 20% cash account would probably be inadequate, even using a 10% minimum transaction of the stock value, like AIM-HI. You could possibly burn through your cash account in a hurry.
My conclusion is that if you are going to use AIM with volatile sector funds or individual stocks you might be better served to follow Tom's IW recommendations when you begin an AIM account.
Otherwise, AIM-HI will probably be adequate for most 'diversified' mutual funds.
This is just my opinion and I am sure that others have different opinions.
Ray
