A.I.M. Users Bulletin Board

[ls7550]

Hi Allen

One possibility would be to run a second item in parallel to the primary one, i.e., run SPY or an index like ^GSPC (Yahoo's S&P 500) and enter data at the same time we update the primary position. The problem with this is that we'd have to update more frequently which is what AIM does not want you to do.

I find that simpler myself. Just run virtual/paper AIM and use the % stock and % cash as the indicated appropriate amount to have invested at the time whenever AIM is indicating a trade.

Use a index fund so there's no chance of it going broke. Let AIM tell you when to trade, and how much % stock and % cash to realign to at that time.

That is especially handy for the likes of 2x funds. If instead of 100 in 1x you hold half (50) in 2x, half (50) in 'cash' then AIM will tell you how much as a percentage stock value amount and when to adjust, but where if you're holding 2x you just hold half the % indicated amount of stock holdings.

An even simpler choice is just to realign to what the vwave is indicating at the time, leaving AIM just telling you when to make actual adjustments (trades). If for instance AIM was indicating a trade and vwave for a portfolio/index was indicating 40% cash (and hence 60% stock), and you were holding a 2x stock choice, then readjust to 30% in 2x stock, 70% cash.

Fundamentally the primary benefit of AIM is that you're more inclined to actually make appropriate trades in an appropriate manner at appropriate times. All too often many investors fail to add-low (or reduce-high). Greed or fear takes hold and they miss the opportunities - which leads to relative lag. It also steers you towards appropriate average % stock (and % cash) over time. Compare AIM that averaged say 65/35 stock/cash over x years to someone who just yearly rebalanced to 65/35 weightings and the two will compare relatively closely, however you can't know that 65/35 was the more appropriate weightings at the offset, and with yearly rebalancing there's a greater risk that the investor might opt to delay or use some other adjustment due to fear/greed (emotions) at the time - that more often tend to prove to have been a cost rather than a benefit.