A.I.M. Users Bulletin Board

[ls7550]

Hi Tom.

Here in London we have Investment Trusts, stocks whose sole purpose is to invest in stocks (bonds/whatever). Many of those permit degrees of flexibility and even incorporating some (typically modest) leverage (or de-leverage/cash).

PNL for instance (trustnet link) - whose primary objective is to protect and increase (in that order) the value of shareholders’ funds. Others such as FCIT have been around for over a century (FCIT is a world stock tracker type choice).

Comparing my AIM records for a stock/gold/cash asset allocation however with the likes of PNL and broadly AIM did a better job of dynamically adjusting weightings than PNL. Matched more like a FCIT/PNL blend (as a form of stock/bond type holding) rewards, with PNL alone type (reduced) risk. So as a manager, a simple robot (AIM) that was fed just price alone, did as well/better than highly paid managers (PNL's fees are a rather heavy 0.75%/year, so in fairness the managers might have added value, but fundamentally just paid themselves the benefits).

And with AIM you have full control, not at risk of a change in management/staff/policy.

As a retiree I could just hold PNL, or a FCIT/PNL combination, and draw a regular inflation adjusted income (SWR) from that. But I can in effect pay AIM what the managers pay themselves to run those funds, and AIM has provided just as good guidance historically, adjusted appropriately around the highs and lows. For me major stock funds are good enough, no need for sectors. REIT wise - well we have enough in home(s) value to not really warrant adding more exposure. Current and future inflation adjusted pensions add a solid foundation (could at a pinch get-by with just the rent having been paid (owner occupier) and pensions covering basic living expenses).

I do use a modified version of AIM however. I track inflation adjusted prices as that better levels things down IMO. I also have AIM trade less often, 20% SAFE, 10% minimum trade size amounts (trade larger amount less often). Even then I don't actually follow through with those trades, just on paper, and instead use the ongoing weightings as indicated by AIM at the time to adjust actual holdings once/year or so, similar to when others might be rebalancing back to their 60/40 or suchlike weightings, but instead to AIM indicated dynamic weightings.

One benefit of SWR style income withdrawals is that its inflation adjusted, so last years drawn $$$ income amount is increased by CPI, which is a comfort in times of high/rising inflation, when workers might be battling to get their wages increased in line with inflation. A risk there however is that your personal rate of inflation may very well be higher or lower than the change in CPI. Certain foods I like for instance (such as Genoa cake) have near doubled in price over the last year. I very much suspect that when it again becomes cheaper to buy the ingredients and heat the ovens required to bake those cakes that the prices wont halve back down again.

Clive.