AI
Tuesday, August 06, 2024 2:58:25 PM
Hi Tom.
If Portfolio Control was accelerated at a 1%/year monthly pro-rata rate from 1985 [prior PC x ( 1.01^(1/12)) each month], when dividends started to be taxed more, more of earnings tending to be retained, then the 2009 period AIM %CASH did dip to zero cash briefly. With that setting and changing minimum trade size from 5% to 10% you get back to a similar looking chart again. The larger minimum trade size slows the number of trades and helped to preserve cash more during deep dive events
Using Precious metals for 'cash' was better than using T-Bills (silver from 1933 to 1975, gold from 1976, as gold was prohibited to be traded in those earlier years).
A key factor is how AIM by building up cash reserves during Bull runs, helped attenuate the declines, portfolio drawdows were less deep, and in so doing increased SWR. With AIM using real (inflation adjusted) stock price as its input, 10% SAFE and Minimum Trade Size, monthly reviewed, traded on paper, and then at each year end using the year end AIM %CASH as the amount to load into precious metal at the start of the new year, the rest in stocks, leaving that as-is for the year (assuming dividends automatically reinvested to buy more stock shares) and the historic SWR oucome ...
Commonly stocks are assumed to have supported a 4% SWR, as the Total Stock Market (all stock) red dots indicate in the above chart. With AIM the SWR was increased to more than 5% (lowest of the black dots).
Overall rewards for AIM compared to TSM were similar, but achieved with less volatility, and averaged getting on for 50% 'CASH' (precious metals)
AIM'ing the real (after CPI adjustment) share price instead of the nominal share price helps direct AIM away from otherwise tending to build up too much cash reserves.
Best wishes
Clive
PS
A SWR of 5% means that you draw 5% of the start date portfolio value as your spending amount for that year, then each year thereafter you increase that $$$ amount by inflation as the amount drawn for spending in subsequent years. So its a regular inflation adjusted income year after year. Typically SWR periods are measured across a assumed 30 year period (see a 65 year old through to age 95).
If Portfolio Control was accelerated at a 1%/year monthly pro-rata rate from 1985 [prior PC x ( 1.01^(1/12)) each month], when dividends started to be taxed more, more of earnings tending to be retained, then the 2009 period AIM %CASH did dip to zero cash briefly. With that setting and changing minimum trade size from 5% to 10% you get back to a similar looking chart again. The larger minimum trade size slows the number of trades and helped to preserve cash more during deep dive events
Using Precious metals for 'cash' was better than using T-Bills (silver from 1933 to 1975, gold from 1976, as gold was prohibited to be traded in those earlier years).
A key factor is how AIM by building up cash reserves during Bull runs, helped attenuate the declines, portfolio drawdows were less deep, and in so doing increased SWR. With AIM using real (inflation adjusted) stock price as its input, 10% SAFE and Minimum Trade Size, monthly reviewed, traded on paper, and then at each year end using the year end AIM %CASH as the amount to load into precious metal at the start of the new year, the rest in stocks, leaving that as-is for the year (assuming dividends automatically reinvested to buy more stock shares) and the historic SWR oucome ...
Commonly stocks are assumed to have supported a 4% SWR, as the Total Stock Market (all stock) red dots indicate in the above chart. With AIM the SWR was increased to more than 5% (lowest of the black dots).
Overall rewards for AIM compared to TSM were similar, but achieved with less volatility, and averaged getting on for 50% 'CASH' (precious metals)
AIM'ing the real (after CPI adjustment) share price instead of the nominal share price helps direct AIM away from otherwise tending to build up too much cash reserves.
Best wishes
Clive
PS
A SWR of 5% means that you draw 5% of the start date portfolio value as your spending amount for that year, then each year thereafter you increase that $$$ amount by inflation as the amount drawn for spending in subsequent years. So its a regular inflation adjusted income year after year. Typically SWR periods are measured across a assumed 30 year period (see a 65 year old through to age 95).
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