A.I.M. Users Bulletin Board

[AIMster]

Hi, Tom,

Regarding the IYY/RMT, EFA/EMF pairs, I went out to stockcharts and ran 'em through the ol' performance chart. Stretch the time totally out and EMF was the best performer. Until recently. Looking at a shorter scale, the diversification benefit started to be erased last Spring going into early Summer and the four are now in fairly close lockstep.

See: http://stockcharts.com/charts/performance/perf.html?IYY,rmt,efa,emf

Which begs the interesitng idea if there isn't some sort of diversification/correlation metric that should be considered as a factor in our various programs. I suppose it would be if there's a great(er) amount of diversification in the market as a whole, of which these funds are loose proxies, (many stocks 'zigging' as others are 'zagging') then the benefit leans toward a diversified Buy & Hold type. On the other hand, increased correlation means greater volatility as we've seen the last few months - an environment ideal for AIM - as long as we've the cash reserves to ride the "roller coaster." Wheeeeeeee! I know the VIX speaks to some of this, perhaps all of it, but the idea lit the "idea bulb" above my head so I thought it worth sharing.

Best,

AIMster