Hi Toofuzzy,
I totally agree with you. You do need a reasonably sized cash reserve for any NASDAQ-oriented ETF. With the TQQQ being the most cash hungry in market downturns. However, I have owned my TQQQ position since about 2011, and I backtested it as if I would have AIMed it instead of just buying and holding the shares. If I would have started with an 80/20 split, It would have only taken about half of my cash during each of those really bad times..... Most recently this year, it took slightly less than half of my cash had I used the AIM method for the 10 years I've owned the shares.
I didn't think that was too bad. There are a couple of things to remember, however. First and foremost, I hold the shares in my regular brokerage account and have been slowly selling off my position in the TQQQ up to the top of my tax bracket over the last 5 years, and will probably continue to do so. At least until I get it back down into a more manageable position I will use AIM from now on.
Let me be crystal clear, I'll admit that I'm not a genius. 10 years ago I bought the shares and didn't really know what the heck I was buying. I had no appreciation for what a triple leveraged ETF wasn't how it rebalances daily. All I know is that I let it go and resisted selling and it grew into a huge position. Way bigger than I expected. I was just looking on my computer and my cost basis is $1.63 per share, split-adjusted. Even after its significant decline this year, I'm still up 15x - 20x. The AIM position in the TQQQ will be financed completely with the house's money, that is, it would be financed with winnings from that position. I don't have to risk any of my own starting capital. So, I'm pretty lucky. (If I was only in that position with some of my other holdings!!)
Anyway, I don't know how you or other people on here handle speculative holdings. I always consider between 10% and 15% of my portfolio as speculative. Meaning that I will have a significantly higher risk in that portion of my portfolio than anywhere else. For me, it helps make things interesting and keeps me engaged. If all those positions went to zero, I wouldn't be happy about it, but it wouldn't affect my retirement date either.
I've been lucky with that TQQQ position. It's been good to me even though I didn't deserve it. If I was as educated as to how that ETF works back then as I am now, I would have probably never opened the position.
I like the AIM methodology. It would have reduced some of my risk over this last downturn. Also, Tom showed me and gave me some brief commentary on how to use the V-Wave to adjust my cash position to start. I plan on implementing that as well. It's time to dial back some risks and have a more mechanical investment strategy going forward. AIM is wonderful for that.
Thanks, Toofuzzy!! I have appreciated all of your input. For a greenhorn to the AIM system like me, I have appreciated your help and everyone here pitching in and filling my knowledge gaps.
All the best!!
Dan
