Monday, March 04, 2002 1:10:26 PM
Why Use AIM?
While not specifically a question, here is one explanation from
JSLyons:
Hello Sarmad,
Thanks for your post. Perhaps we need to factor in how/why many of us came to AIM, in order to better appreciate its value. I bet my own experiences were not atypical, although I was also lucky along the way.
I grew up with the stock market (my father was a broker turned economics professor) and have run my own accounts for almost 25 years. I invest in almost nothing by the tech sector, by which I mean real technology not dot.con vapor businesses. For years I played the buy-and-hold game, focusing on emerging technologies at the early end of the food chain. I hardly ever sold, except when things went badly.
My top holdings were and remain, KLIC, ATMI, and MKSI (it used to be ASTX). All of these share a certain fundamental characteristic -- they make the equipment that makes the chips that make much of the world turn. If you think it through, there is a 'multiplier effect' at work as the chip-making industry ramps up (INTC can go from 19 to 30, while KLIC goes from 8 to 24).
With my father's help, I identified most of these companies long before they were well known and, as a result, I have excellent entry points on most of them, meaning significant paper gains.
So why do I need AIM? Because I never mastered the art of taking profits. I would bet that for most private investors, this is by far the hardest part of the game. AIM offers a rational, systematic approach that forces me to take partial profits as prices rise. Likewise, it forces me to add shares in companies I still like after considerable declines.
Remember the WS saying about a declining stock, "If you liked it at $20, you should love it at $12." This is often true, but how many of us on our own step up and add more as our sure-thing, can't-miss stock drops 40 percent? I dare say not too many, although we all know the idea, as you say, is to buy low and sell high.
In my case, I came to AIM when I was ready to...purely by accident. Here's where the luck comes in. Near the height of the recent mania, my wife and I decided we wanted to buy a house in the States sometime in mid-2001. We had been working overseas for 11 of the past 12 years and had no roots back home.
In order to set aside money for the downpayment -- we're conservative about debt and planned to put down far more than the average buyer -- I began to sell a portion of my portfolio. But the market kept going up! So I sold a bit more. Each time I sold a block of stock, rising share prices seemed to restore all or most of the total value, as if by magic. My total stock value stayed almost the same. I recall writing to my father, who is a brilliant stock picker but not so good at selling in time, that I had come to look at the bull market like an ATM machine. Periodiclly, I went to the keyboard and took out my cash.
Of course, it would be nice to claim to be a stock genius who called the top dumped his high tech shares near the end of a record bull market, but in fact it was due largely to an exogenous event -- the desire to buy a home sometime in the near future. In short, to replicate my past success I needed to replicate the 'house factor' should my portfolio expand again in the future.
Then I stumbled on Mr. L's book, courtesy of Tom's SI board. I already had the analogy of a 'money machine' or an ATM in my mind. I just needed the business plan to put it altogether, and a rational way to manage the risk. That's all AIM is, and not amount of tweaking, backtesting, computerization -- no matter how brilliant -- can change that.
FWIW, I use the BTB settings of 10/10/5, and stagger my market orders one month apart, minimum. A quick review of my 10 AIM accounts since Sept 1, 2001 shows:
2 with no trades at all (including my only non-tech, which is a bond fund designed to generate income)
2 with only BUYS (when they recover, I'm on my way)
2 with only SELLS (I'd have done better so far with buy and hold, but at significantly more risk)
4 with both BUYS and SELLS (these are my favorites). My ASYT shares are close to my entry, yet I am well ahead in total portfolio value.
Am I a millionaire? Not yet. But like Tom says at his site, I have the patience and determination to see it through.
best regards,
Jonathan
While not specifically a question, here is one explanation from
JSLyons:
Hello Sarmad,
Thanks for your post. Perhaps we need to factor in how/why many of us came to AIM, in order to better appreciate its value. I bet my own experiences were not atypical, although I was also lucky along the way.
I grew up with the stock market (my father was a broker turned economics professor) and have run my own accounts for almost 25 years. I invest in almost nothing by the tech sector, by which I mean real technology not dot.con vapor businesses. For years I played the buy-and-hold game, focusing on emerging technologies at the early end of the food chain. I hardly ever sold, except when things went badly.
My top holdings were and remain, KLIC, ATMI, and MKSI (it used to be ASTX). All of these share a certain fundamental characteristic -- they make the equipment that makes the chips that make much of the world turn. If you think it through, there is a 'multiplier effect' at work as the chip-making industry ramps up (INTC can go from 19 to 30, while KLIC goes from 8 to 24).
With my father's help, I identified most of these companies long before they were well known and, as a result, I have excellent entry points on most of them, meaning significant paper gains.
So why do I need AIM? Because I never mastered the art of taking profits. I would bet that for most private investors, this is by far the hardest part of the game. AIM offers a rational, systematic approach that forces me to take partial profits as prices rise. Likewise, it forces me to add shares in companies I still like after considerable declines.
Remember the WS saying about a declining stock, "If you liked it at $20, you should love it at $12." This is often true, but how many of us on our own step up and add more as our sure-thing, can't-miss stock drops 40 percent? I dare say not too many, although we all know the idea, as you say, is to buy low and sell high.
In my case, I came to AIM when I was ready to...purely by accident. Here's where the luck comes in. Near the height of the recent mania, my wife and I decided we wanted to buy a house in the States sometime in mid-2001. We had been working overseas for 11 of the past 12 years and had no roots back home.
In order to set aside money for the downpayment -- we're conservative about debt and planned to put down far more than the average buyer -- I began to sell a portion of my portfolio. But the market kept going up! So I sold a bit more. Each time I sold a block of stock, rising share prices seemed to restore all or most of the total value, as if by magic. My total stock value stayed almost the same. I recall writing to my father, who is a brilliant stock picker but not so good at selling in time, that I had come to look at the bull market like an ATM machine. Periodiclly, I went to the keyboard and took out my cash.
Of course, it would be nice to claim to be a stock genius who called the top dumped his high tech shares near the end of a record bull market, but in fact it was due largely to an exogenous event -- the desire to buy a home sometime in the near future. In short, to replicate my past success I needed to replicate the 'house factor' should my portfolio expand again in the future.
Then I stumbled on Mr. L's book, courtesy of Tom's SI board. I already had the analogy of a 'money machine' or an ATM in my mind. I just needed the business plan to put it altogether, and a rational way to manage the risk. That's all AIM is, and not amount of tweaking, backtesting, computerization -- no matter how brilliant -- can change that.
FWIW, I use the BTB settings of 10/10/5, and stagger my market orders one month apart, minimum. A quick review of my 10 AIM accounts since Sept 1, 2001 shows:
2 with no trades at all (including my only non-tech, which is a bond fund designed to generate income)
2 with only BUYS (when they recover, I'm on my way)
2 with only SELLS (I'd have done better so far with buy and hold, but at significantly more risk)
4 with both BUYS and SELLS (these are my favorites). My ASYT shares are close to my entry, yet I am well ahead in total portfolio value.
Am I a millionaire? Not yet. But like Tom says at his site, I have the patience and determination to see it through.
best regards,
Jonathan
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