Hi Tom.
The approach/concept I was outlining to Dan was a combination of lump-in and average-in, in around equal measure, but with the optionality to go all-in if/when stocks became relatively cheap.
Start with a conceptual target of a core 33% lumped in, adding another 33% perhaps averaged in over a decade to end at half having been lumped half averaged-in. But if prices dive deep enough go all-in.
For example AIM started in 2000 (stock high) that way (Vealies for all sell trades) had deployed all of cash by mid 2006 in a manner such that you ended with 1.5 times as many shares being held than had you lumped in at the start of 2000. Which could be considered as having purchased stock at a 33% discount compared to the lumper, or where if the lumper has a minimum 4% SWR potential, the AIM'ers minimum SWR potential was an effective 6% SWR.
That was for a relatively bad start date. In a stock do well situation you might lump a third in immediately, average in another equal amount over say 10 years, have started with 33/67 stock/cash, ended with 67/33 stock/cash, averaged 50/50 stock/cash. Over times when stocks do well, 50/50 portfolios also do OK (just not as well as if you'd been all-stock). But if additionally AIM has you at some point going all-in, in having followed all buy trades but Vealie'd all sell trades, then overall the rewards can be close to that of having lumped all-in from the start.
Basically start a AIM with 66% initial cash, Vealie all sell trades and once all of cash has been deployed you're done. You've bought in at a discount to 'average' and in so doing relatively outperformed the average - forever thereafter.
That's different to Term/Twin Invest which a pure average-in manager, doesn't automate the optionality of going to all-in. You could lump 33% in, Term/Twin Invest another third, keep a third in cash that you lump in if/when prices seem low, but that introduces human emotion/selectivity/manual-timing instead of letting AIM do the timing for you automatically.
Might not hit the lows, late 1929 stock peak start date for instance and all of cash was deployed 'too early', no cash remained to buy into the late 1932 lows as all of cash had been deployed by mid 1931. But still had 50% more shares than a late 1929 lumper, so lost less, recovered quicker. Would still have been uncomfortable in having gone all in to see further stock prices (halving again), but that relatively quickly recovered back up again, at least compared to a 1929 lumper.
Fundamentally diversification and averaging. A third immediately lumped in, another third averaged in, so combined lump/averaging rather than either alone, and a further third to lump in when prices dive deeply. Yielding better overall risk adjusted rewards. And all automated by AIM (with Vealies).
Clive.
