A.I.M. Users Bulletin Board

[SFSecurity]

Hi Tom, My understanding is the AAII is, for the most part, a semi-buy and hope portfolio. It has a few criteria that govern what is in the portfolio and when it gets dumped. To get into the portfolio it has to be a small cap, less than $300 million and gets bumped out, if there is something to replace it, when it gets to $900 million. There are other factors also in use. As far as I know there is no cash reserve. They get the money to buy the next position from selling the bumpee.

The SPY had no cash hoard, just the dividends that came in. And the AIM version had 30% cash. Less than that cash went negative.

As to the results Lichello shows in his book, remember that when he starts at $10 and goes down to $4 that is a 60% drop, something that vary rarely happens in the real world. And then when it goes back up to $10 that is a 250% move in just three months. That, too, is rarer than hens teeth. So, while the concept is great the figures he uses to prove it are wacky at best.

Best,

Allen