Hi Tom,
Good you asked, it made me check my spreadsheet again! I didn't test standard AIM at all, but AIM with Vealies stopping sells at cash over 25%! Back to the drawing board. I also changed my minimum transaction to 5% of PV, and allowed .25% interest/month.
The bad news is that AIM without vealies (or vealies at CA = 100% PV) is much worse off: Return 6.8%, Risk 6.4%, Sharpe Ratio .29. That is Very Bad, compared to the SR .44 of B&H. Things look up when the vealies kick in, however:
Vealies at 100%: 6.8%/6.4%, SR .29
Vealies at 50%: 7.9%/7.7%, SR .37
Vealies at 33%: 9.1%/10.0%, SR .41
Vealies at 25%: 9.7%/11.2%, SR .42
Vealies at 20%: 10.3%/12.2%, SR .43
Buy and Hold: 12.0%/15.8%, SR .44
Now the last two AIM options differ less than 5% from the B&H Sharpe, so let us call those a draw. But who would set the Vealie level at 25%, let alone 20%? Perhaps this analysis is an encouragement to do so with very stolid stocks/funds!
More bad news: my estimates for bond rate and interest make this exercise a bit dubious. If anything, I seem to have underestimated the bond rate, and higher Risk Free Return favors the higher return option; B&H in this case. (I checked RFR 6%, interest 4%/year.)
The conclusion is: AIM is at best struggling to make the reduced risk compensate for the reduced return; in this case of course. I am convinced there are better AIM candidates than the SP500!
Regards,
Karel
