A.I.M. Users Bulletin Board

[NewAIMer]

Love all the information!! Thank you very much

I appreciate everyone thus far who has responded to my post. I was just trying to get some ideas on how I can move forward with the strategy. For the last 20 years, I've had pretty good luck with a simple rotational strategy with a simple moving average. Although I've done very well with the strategy, I just wanted to diversify my strategies a little bit. I don't have a $1,000,000 portfolio, but it's growing and I feel like it's grown enough to start diversifying my strategy base rather than relying on just a simple rotational methodology.

Anyway, some of the responses regarding minimum trade sizes and possibly splitting the safe criteria differently between buys and sells are a great help. I actually did some preliminary backtesting, by hand, the last couple of days. Many of you said a higher volatility underlying is best. So I randomly chose the Nasdaq leveraged ETF, the TQQQ, and just for the heck of it back-tested it from January 2015 to July 2022. I would have gone back further and still might. The problem is that the split-adjusted price of the TQQQ back in 2010 when the ETF was launched, was like .08 or .15 cents and the share count gets crazy.....

I used some straightforward criteria that you guys had mentioned. I didn't make any trade, whether a sell or a buy unless it was at least 10% of my stock value. That seemed to filter out many trades. Additionally, I didn't start with the original "by the book" allocation. I started with an 80% stock and 20% cash allocation. I have the latest edition of the book and Lichello recommended the 80/20 split.

We've been in an unprecedented bull market rally since 2009. I'm sure that skews the results. Nevertheless, I took a hypothetical $50,000 and invested $40,000 into the TQQQ and 10% in cash. As you all can imagine, the AIM method over those roughly 7 years threw off tons of cash. My final number was a total portfolio value of $199,173. Of that, The cash balance in July of this year was $127,146, and the equity value was $72, 027. The overall compound annual growth rate was over 18%. Pretty impressive considering the amount of cash generated in the portfolio. I didn't make any accommodations for the cash. That's raw growth. I did not estimate making any money on the cash just sitting there. I figured if I can do something with that at some point it's just gravy, but I was curious as to what I might end up with just by trading the methodology on a higher beta underlying like the TQQQ without interest or dividend payments influcing the numbers.

Although that was impressive, because we were in such a strong bull market, buy and hold did better during that time. Buying the TQQQ and holding it during the same period would have netted you around $229,108. A compound annual growth rate of around 24%.

Takeaways? I was impressed. Although the AIM portfolio grew at a lower rate, it did so with much less volatility. This is definitely something I'm going to be employing in a portion of my portfolio. I want to keep tinkering with some rules and see if there's some way to reduce the amount of cash just sitting there and deploying it in some fashion. I also understand that a huge market downturn would have exhausted my cash, but it didn't I don't know......It will be fun figuring it out. No strategy is perfect, but this holds promise.

I'm open to any and all criticisms. This was just raw data on a hypothetical investment of $50,000 through the covid crisis and the current bear market conditions. Look forward to contributing here and sharing what I find out and I appreciate all of your input!!!

Dan