A.I.M. Users Bulletin Board

[ls7550]

Hi Jack

from 2005-1 to 2006-4 there are 16 months of 4% withdrawal from Cash of 33334 right?

4% SWR is 4% of the start date portfolio value, so in that case 2005-1 $100,000 portfolio value = $4000 withdrawal amount/year = $333.33/month. Where that is adjusted by inflation each month (usually upwards). Which provides a regular (monthly) inflation pacing income for spending. Right across the whole period (up to the 2020-5 date in that example). So more than $333.33 x 16 months up to 2006-4 as later amounts would have been higher, in reflection of inflationary increases (inflation adjusted amount relative to $333.33 start date value being drawn). Consider a extreme case of a year after starting inflation amount since the start was 10%, then the monthly withdrawal amount would be $333.33 x 1.10 = $366.66 for that month.

cash reinjection? i dont get it. what happen in 2008-11 and 2011-9? what is the exact calculation?

Arbitrary. They were months where the AIM review indicated no action, but where the % cash at the time had risen to relatively high levels. Fundamentally share price declines saw % cash relatively rise, but the share price declines weren't enough to trigger a AIM buy trade, but were deep enough that another investor who was targeting a 50/50 stock/cash asset allocation and saw they were holding perhaps 30/70 stock/cash might naturally have consider that as a time to rebalance back to desired risk exposure/asset allocation levels. AIM can be frugal with its purchasing such that cash reserves accumulate to high levels. Ways to reduce excessive cash accumulation include 1. Vealies - don't sell when AIM is indicating a sell, but increase PC as though the sale had actually been made (which is somewhat like repurchasing the same shares at a relatively high price), 2. Extend AIM to add in a increase PC element, such as increasing PC by the capital value amount of dividends as/when received. 3. Look to manually reduce cash/add to stock as/when cash reserves are excessive ... as how I outlined in that post, which will tend to coincide with times when share prices are relatively low (% cash up due to stock value being relatively down), but that is manual/discretionary.

When you AIM a portfolio of stocks you can move between stocks, reduce some, add to others etc. manually. The idea is you just try to keep the overall portfolio stock value the same. Discretionary elements. You can also add a lump sum to your AIM, or withdrawal a lump sum from it. Again discretionary. Similar if you started with a 50/50 stock/cash AIM and were seeing that at 30/70 you might opt to manually correct that even though AIM wasn't signalling any buy trade action. Again discretionary.

Tasked with guessing which of 1. 2. or 3. above were probably the more potentially rewarding I'd rank them 3. 2. 1. best to worst. Vealies (1) just feel like buying high. PC uplifting (2) feels like cost-averaging. Lumping in when % cash had risen (3) often due to share prices (stock value) declining has the potential to be the better times to have added to stock value. Likely the best is to lump more in when AIM was also signalling to buy, but as AIM buy signals they tend to occur infrequently then waiting for such could entail having to persist with holding too much cash for too long.

Clive.