Thanks guys,
Until recently.....I had absolutely no idea what Vealies were. I appreciate you taking the time to expose me a little more to some of the ideas around beginning my aim portfolio. I am currently mostly in cash, (80%) as my current methodology dictates. I like the idea of aim because it allows you to reduce share count as prices rise sharply. The idea of the Vealies does intrigue me though. Increasing my portfolio control by half when AIM indicates to sell is interesting. Sounds like a way to hang on to more shares longer-term because of the positive drift over time in the markets.
I've messed around backtesting a few different ETFs going back 20 years like the QQQ. Also tried backtesting and the TQQQ .....in a shorter time duration because that particular ETF didn't start until 2011. I liked the TQQQ because of its leverage..... it fires signals more often and therefore shows the effectiveness and movement of the AIM strategy. I started with an 80/20 split. The problem with the AIM method, as you're aware, and as I'm sure the Vealies work to address, is the crazy amount of cash, in terms of allocation, you end up with in a relatively modest number of years. Cash that's sitting there doing nothing. I know you guys probably know this stuff by heart, but I'm a huge options trader and just recently started messing around with the AIM method after discovering Lichello's book.
The problem I discovered running both of those ETFs is that over the years, running a portfolio with no additional contributions is that although you started with an 80% stock allocation and a 20% cash allocation, over those years you end up with about the opposite. About 20% or so in stocks and 80%ish in cash. Even though AIM did a tremendous amount of buying in the early 2000s as well as 2008 and 2009. The massive bull markets that came after those significant downturns in the market created a huge cash hoard in the NASDAQ AIM portfolios. Obviously, in a market that moves higher pretty consistently long term, you miss a lot of gains. I know the true AIM method says put it in some sort of bonds. I have nothing against that. It just seems like it's a crazy amount of cash to be sitting on the sidelines, even in bonds. I realize that's where the Vealies come in.
I still don't fully understand the improvements Tom Veale implemented to improve the performance of the AIM method. I'm working on it though. Any cliff notes versions of adaptations I'd love to know more about. The split safe helped a bit in the portfolios. Taking every buying opportunity and selling only when the trigger allowed for 10% or more in selling in any particular month did indeed improve the long-term CAGR. Additionally, starting the portfolio with a higher allocation to stocks rather than a 50/50 blend also yielded better results. The simple fact is that historically, the market wants to grind higher. Being able to take advantage of buying dips and bear markets is a plus.
Thank you all for your contributions to my questions. I totally appreciate it.
Regards,
Dan
