A.I.M. Users Bulletin Board

[SFSecurity]

Hi Tom and Gang, I looked at VNQ and see that it actually is not a bad AIM position. Mind you, this is looking back at five years of a bull market. With $20,000, 20% cash, 30% minimum share trade, 10% buy safe, 0% sell safe, $1,000 minimum trade and adding the dividends to the totals, the return in the last 5 years would have been 7.983%/year. Not all that bad. If you use commonly recommended 5% minimum share trade the return is only 6.727%, at 10% minimum share trade the return is 6.908%.

Then I got curious about how well VNQ would do starting before a bear market and ending when the price got back to about the place it started. I went from 3/1/2006 through 3/1/2013. WOW!

I had to change things around to make it work. I had to use 65% cash to avoid a negative cash position and cut back on the minimum share trade to 15.5% (16 shares of the 103 starting number), greater or lesser % did not do as well. The result was quite good at 6.800%/year, in fact a whole hell of a lot better than B&H. B&H would have bought 294 shares, $19,968 worth, and ended up with $20,532.96, a total gain of $564.48 plus dividends of $5178.22, a total of $5742.70, versus AIM's gain of $11,637.48, including dividends and after commissions, 102% better.

What I have learned from this exercise is that using a bigger than commonly suggested minimum buy/sell gets better returns. Second, keeping your powder dry and ready to fire when the market takes a downturn is critical, but how does one know when the market is about to hit the skids? Sorry, I've no real answer for that.

I'd guess that one has to take into account both the history of the market, the current length of the bull market and what is going on in the economy to see if it is about to rain. Then one has to look at the typical bear market so as to assess when to start reducing the cash stash. Perhaps a switch to Twinvest for utilizing the cash stash might work during the down market.

What I'm going to do is work on the spreadsheet and see if I can put some sort of of variable cash, somewhat like Tom's Veale but rather than delaying sales to avoid too much in cash actually allow cash to build up as the market gets long in the tooth in preparation for the plunge.

Anyway, this has been fun.

Best,

Allen