Advanced Automatic Investor

[aptus]

Hello JP,

Selecting a model (i.e. configuration options) with which to start depends primarily on two things: (1) Where we are in the investment cycle, and (2) the volatility of your chosen equity.

For (1) I would recommend using the vWave (see the main AIM board for current values) to determine the approximate starting cash reserve, and then use a model that is close to that.

For (2), the more volatile the stock, the less cash you can start with, in general.

Putting them together, start with the vWave's cash reserve recommendation and then add a bit to it if your stock is less volatile.

As you're just starting out, I would recommend that you turn off all of the filters. The filters can actually increase returns over long time periods by removing inefficient trades. However they don't work well for all equities and it's best to get a feel for the AIM algorithm before you start adding complexity.

As for using Bond ETFs, you can if the ETF has enough volatility. However you should view this as an equity rather than it being some sort of asset allocation mechanism.

AI allows you to do asset allocation with its Asset Allocator function. This is where you would concentrate on allocation. If you did indeed AIM a bond ETF, it would form part of the overall asset allocation, along with your other AI portfolios.

The actual Bond ETF within an AI portfolio is not, in itself, considered an allocation (although AIM, by its nature, does allocate between cash and equity). There's an article I wrote some time ago that explains AIM allocation (both at a micro-level and macro-level). You can read it here --> http://www.automaticinvestor.com/articles/mpt.html