A.I.M. Users Bulletin Board

[ls7550]

RE: Parking Cash

Being UK based I have little knowledge of US tax issues - so I can't help there Hook.

You've correctly identified that AIM's cash reserve acts as a drag on the overall AIM performance and it is important to address the issue to get the most from your AIM account(s).

I personally apply AIM's cash reserves to a bespoke equity/cash based strategy that foremost focuses on downside loss limitation. In effect constructing and maintaining a virtual CALL Option but at lower cost via judicious management of staggered positions and multiple stops.

As I see it stock price distributions generally follow a normal form Bell Curve inter-spaced with periodic revaluations to new price plateau levels that install the 'fat-tailed' or 'power-law' effect. Those sizable large changes in prices are more common than standard normal form distributions would have us believe and are the reason why stocks pay such a relatively high risk-premium.

In owning stocks you're insuring someone else's downside risk. By being selective as to when and how much of that insurance risk I take on in a reactive rather than predictive manner I strive to achieve above cash rate benefits whilst maintaining relatively low risk. Historically this has provided returns better than midway between cash and stocks - such that when combined with AIM's above average XIRR collectively produces comparable total rewards to that of buy-and-hold but with lower risk. Add on some alpha benefit (stock selections/rotations etc.) ;>)

Regards, Clive.