A.I.M. Users Bulletin Board

[ls7550]

Hi Doug. I'm going to shamefully (but I might add, not without discomfort) play devils advocate here (if you use NoScript then you'll have to deactivate it to correctly view that web link content)

A point of note is that bonds achieved 5.3% annualised over that period whereas your AIM used a 2% assumed 'cash' rate. I believe your AIM indicates around 32% average cash over the total period (at least for the 2014 spreadsheet version that I have locally stored), so that's around a 1% annualised 'understatement' of AIM's rewards compared to 50/50. i.e. 2% x 0.32 versus 5.3% x 0.32 As-is comparing that web link to your own AIM results sees comparable total rewards, at least to the end of July 2016.

In fairness (i.e. factoring in higher bond returns than what you accounted for) AIM was better than 50/50 initial buy and hold, but it was less better than 50/50 yearly rebalanced. Much of that additional AIM benefit arose out of moving deeply into stocks, light on cash during the 2008/9 financial crisis. Down to around 6% cash reserve remaining at the 2009 lows. Nicely 'timed', but I recall all too well myself considerable concern at such low cash levels at that time. Had things continued on downwards from there !!! By contrast 50/50 is the more comfortable of the two. The more aggressive stance taken by AIM can yield higher rewards, as indeed is apparent in your spreadsheets case. Whether that extra volatility/risk warrants the higher reward ??? I think Robert Lichello came to understand that in later years and hence moved to 80/20 as, if you're going to be up at that or higher stock weightings at the lows anyway, might as well maintain that sort of risk exposure level at other times as well.

Please take this as intended - as constructive criticism. Your web pages are great, very well written/constructed, and appreciated. If you were considering extending them however a evaluation of 80/20 (AIM-HI) would IMO be worthwhile. 80/20 is more akin to being 100% stock, but with some 'trading' mixed in that helps reduce risk (portfolio volatility) whilst generally providing similar overall reward. With 80/20 and if stocks drop 30% and cash is expanded by interest and cash dividends, then the ratio might be more like getting on for 30% cash reserves in hand and available to be deployed into stocks.

Thanks again for your updates and sharing.

Regards. Clive.