AI
Monday, August 08, 2022 11:30:55 PM
Thank you Tom and toofuzzy!
Thank you Tom for the link for the Excel worksheet. I will start fiddling with it when I get a chance. I appreciate you sharing it with me.
Toofuzzy, I totally agree that backtesting doesn't do anything except make me more comfortable with how AIM works. I've done a ton of backtesting by hand the last couple of weeks. Partially because I didn't have an Excel sheet to use and didn't want to take the time to format one. (I'm not the best at Excel.) I also wanted to do it by hand so I understood the mechanics of the AIM strategy. It has definitely done that for me. I have a great feel for how the strategy works.
It's one of the reasons I want to use the method on an ETF of some sort. I don't have enough time to research stocks that I feel comfortable investing in. Indexes move around less but offer the security or at least the reduced risk of going to zero. The reason I use the triple leveraged ETFs is simply to understand the mechanics. Do I think the triple leveraged ETFs go to zero? No, I'm not super worried about that. The reason I've ever used the triple leverage ETFs is because they're capital efficient. If I have $10,000 to invest in the S&S 500, I can invest 1/3 of that into a triple leveraged fund and receive roughly the same returns. I can allocate the rest of the money more conservatively, so for me, it works. I have no problem with the volatility, I have a reasonably strong stomach for it, but I believe balance is key. I don't fear those things, but I certainly respect them and my whole portfolio is not just UPRO or TQQQ. They're a tool like any other. (On a whim, I bought some TQQQ back in 2012. I believe my cost basis, adjusted for splits, is like $1.50. Even though the stock has coming down a lot, I have a pretty sizable profit in that ETF, and it's in a taxable account so I'm still not in a hurry to sell it, but I wish I would have discovered AIM sooner.)The leveraged ETFs do have negatives. They are relatively expensive from a fee perspective and they move around a lot. But that's a positive for the AIM strategy. The AIM strategy likes high beta stocks and ETFs.
I've traded around my TQQQ and UPRO positions for probably 8 years and have done pretty well..... the reason I like the AIM strategy is that it has a slick math formula. A math formula that more or less makes buy and sell decisions easier. But at its core, it's trading around a position. Something an old investing mentor introduced me to over 20 years ago, and I've refined it a little since, but not as rule-based as AIM.
The reason I like the ETFs for the AIM strategy, is because AIM has historically done a great job of creating a large cash hoard by virtue of it's formula, and even though there were sizeable downturns in the market in 2018, 2020, and 2022, AIM generated a decent cash pile as relative insurance should one of those ETFs go to zero, you wouldn't lose your entire initial investment. Although I think it's unlikely, even for leveraged ETF, to go to zero. But it's hard to argue that it could take a decent beating should we have another period like we've had so far on 2022. But who really knows? I'm perfectly comfortable allocating a small percentage of my portfolio to a leveraged product to help juice my overall annual CAGR. If one goes to zero, it wouldn't ruin me or anything, as most of my investments are in regular ETFs of some sort.
I have begun to use AIM on some of the more stable ETFs like the SPY and QQQ. As you know, the problem is that these don't move around as much........ and AIM is far less effective at generating higher returns unless it is generating buys and sells....... AIM can go several years without generating a sizable buy or sell order in some of these. It's essentially buy and hold at times. The leveraged ETFs, even when rebalanced monthly, generate more selling and buying, an essential component when trading the AIM method.
Thank you, toofuzzy. I appreciate what you're saying. It's good to be reminded of some good old-fashioned logic once in awhile. I promise that your point here is not wasted on me.
Thank you Tom for the link for the Excel worksheet. I will start fiddling with it when I get a chance. I appreciate you sharing it with me.
Toofuzzy, I totally agree that backtesting doesn't do anything except make me more comfortable with how AIM works. I've done a ton of backtesting by hand the last couple of weeks. Partially because I didn't have an Excel sheet to use and didn't want to take the time to format one. (I'm not the best at Excel.) I also wanted to do it by hand so I understood the mechanics of the AIM strategy. It has definitely done that for me. I have a great feel for how the strategy works.
It's one of the reasons I want to use the method on an ETF of some sort. I don't have enough time to research stocks that I feel comfortable investing in. Indexes move around less but offer the security or at least the reduced risk of going to zero. The reason I use the triple leveraged ETFs is simply to understand the mechanics. Do I think the triple leveraged ETFs go to zero? No, I'm not super worried about that. The reason I've ever used the triple leverage ETFs is because they're capital efficient. If I have $10,000 to invest in the S&S 500, I can invest 1/3 of that into a triple leveraged fund and receive roughly the same returns. I can allocate the rest of the money more conservatively, so for me, it works. I have no problem with the volatility, I have a reasonably strong stomach for it, but I believe balance is key. I don't fear those things, but I certainly respect them and my whole portfolio is not just UPRO or TQQQ. They're a tool like any other. (On a whim, I bought some TQQQ back in 2012. I believe my cost basis, adjusted for splits, is like $1.50. Even though the stock has coming down a lot, I have a pretty sizable profit in that ETF, and it's in a taxable account so I'm still not in a hurry to sell it, but I wish I would have discovered AIM sooner.)The leveraged ETFs do have negatives. They are relatively expensive from a fee perspective and they move around a lot. But that's a positive for the AIM strategy. The AIM strategy likes high beta stocks and ETFs.
I've traded around my TQQQ and UPRO positions for probably 8 years and have done pretty well..... the reason I like the AIM strategy is that it has a slick math formula. A math formula that more or less makes buy and sell decisions easier. But at its core, it's trading around a position. Something an old investing mentor introduced me to over 20 years ago, and I've refined it a little since, but not as rule-based as AIM.
The reason I like the ETFs for the AIM strategy, is because AIM has historically done a great job of creating a large cash hoard by virtue of it's formula, and even though there were sizeable downturns in the market in 2018, 2020, and 2022, AIM generated a decent cash pile as relative insurance should one of those ETFs go to zero, you wouldn't lose your entire initial investment. Although I think it's unlikely, even for leveraged ETF, to go to zero. But it's hard to argue that it could take a decent beating should we have another period like we've had so far on 2022. But who really knows? I'm perfectly comfortable allocating a small percentage of my portfolio to a leveraged product to help juice my overall annual CAGR. If one goes to zero, it wouldn't ruin me or anything, as most of my investments are in regular ETFs of some sort.
I have begun to use AIM on some of the more stable ETFs like the SPY and QQQ. As you know, the problem is that these don't move around as much........ and AIM is far less effective at generating higher returns unless it is generating buys and sells....... AIM can go several years without generating a sizable buy or sell order in some of these. It's essentially buy and hold at times. The leveraged ETFs, even when rebalanced monthly, generate more selling and buying, an essential component when trading the AIM method.
Thank you, toofuzzy. I appreciate what you're saying. It's good to be reminded of some good old-fashioned logic once in awhile. I promise that your point here is not wasted on me.
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