A.I.M. Users Bulletin Board

[OldAIMGuy]

Good morning S123 and Welcome,
Re: getting started with AIM and wealth accumulation....

My history with AIM started in 1986 when I first read Mr. Lichello's book. I decided to model my own portfolio (company stocks and income Closed End Funds at that time) on a separate spreadsheet using AIM and compare the results over the following year. Starting January of 1987 I tracked my own total portfolio value with my own trading vs AIM with the same starting portfolio and its own trade cycle.

I managed to get ahead of AIM by mid Summer 1987. I had more value and more cash than AIM at that time. Then, came September. My account started to fall off and I started to buy back shares of my favorites as they were discounted. AIM didn't do ANYTHING! Aha! Look how much smarter I was than AIM!

Then October came. I continued to buy the first two weeks of October while AIM barely spent any pocket change. All that changed on October 19, 1987. The markets came undone. I couldn't get valid quotes on any of my positions for much of the day. By day's end all the shares I'd bought since September's decline started were now sadly at a loss. Older shares were a mix of long term gains and losses. AIM started to buy seriously at this point.

I had consumed somewhere between 1/3 and 1/2 of my cash reserves BEFORE the Crash. AIM has spent pocket change. As the decline continued, I burned through the rest of my cash in October, November and ran out in early December. AIM ran out at the same time. However, I'd made my smallest buys at the December lows since I was almost out of cash. AIM made its largest buys at the same time.

Hmmmmmmm. Maybe I wasn't so smart.....

I'd done okay on the SELL side of my activity but failed compared to AIM on the Buy side. It was a far more frugal Purchasing Agent than I. AIM owned more shares at far better average cost than did I. So, if we were to Fast-Forward 9 months, AIM would have been well ahead of me as the markets recovered.

Starting January of 1988 I converted all of my holdings to AIM engines with little or no cash. I sold as the markets recovered, now based upon AIM's suggestions rather than my own inferior methods. By the end of summer 1988 I'd rebuilt a comfortable reserve of cash. I've been using AIM ever since.

I would describe AIM as long periods of boredom followed by short bursts of manic activity. Quality of investment is very important for success as AIM takes time to work. Market cycles don't come along every 6 months like they do in Mr. Lichello's $10-$4-$10 example.

What you select for AIM will depend upon several factors like age, how much you can afford to lose, family status, tolerance for risk, etc. Over the years I've come to appreciate the term "Total Return." Today I look for cyclical stocks that pay a reasonable dividend. AIM will handle the cycles and I'll get paid a dividend while I wait. Only 5% of my overall portfolio is committed to individual company stocks. I refer to it as my "Sandbox" portfolio as it gives me a place to play.

As for the core of my portfolio, it is invested in a variety of exchange traded and closed end funds. Generally for U.S. investing I use sector specific ETFs and right now I'm using equal weight designed funds. Outside the U.S. I use style type ETFs such as Small Cap Value, etc.

On the Income side of the portfolio I use a mix of government, corporate and real estate funds. I like having it divided such as each of these follow slightly different aspects of the interest rate cycle, economic cycle and market cycle. That gives some balance to the income portfolio.

We can't force the markets to behave as we wish. We can only have a well designed plan as to what is appropriate action if/when the markets move up or down. Limiting our selections to stocks or funds that have performed a certain way historically may not be a valid investment filter. Peculiar activity (historic or otherwise) may have causes we can't divine.

I have limited experience with leveraged funds. The 'wildest' portfolio I've maintained was a 1.5X sector mutual fund account. It has worked well and does seem to achieve better results than its 1.0X cousins. However, I also adjusted the settings on that portfolio's holdings. I used the ProFunds Ultra Sectors as the fuel. I increased minimum trade size to 8% of Portfolio Control, use 10% SAFE for buying and zero SAFE for selling. I add 5% to Buy SAFE with each sequential buy. I reduce it by 5% with each Sell until it returns to 10%. Those are the main things.

I think the enhanced performance of the 1.5X portfolio is partly due to the greater amplitude of price range and partly due to the larger trade sizes I now use as management of these funds. Currently all of the AIM sector funds have a Buy SAFE larger than the minimum 10% as all have been buying recently. Energy has the highest at 35% and it's also out of cash. Current cash levels range from zero to 32% (consumer discretionary) right now. Here's an example:


The group here will be happy to help you with all questions. Don't forget Chapter 15 in Mr. Lichello's book called Twinvest. It's a great way to start building positions to AIM-able total value. You accumulate shares and cash along the way. Better than Dollar Cost Averaging. Generally it is felt you should have $10,000 minimum for AIM to effectively work for a single holding.