A.I.M. Users Bulletin Board

[OldAIMGuy]

Hi I, Re: Cash Reserve Level..................

I see AIMster has already given you a good answer. As he stated, one can run an AIM account just like the book, maybe use the "vealie" idea and put a cash reserve upper limit on the account or use a floating upper limit such as the v-Wave.

Each will have its own effect over time. Much depends upon the underlying security that is being monitored by the AIM method. If it's conservative and highly diversified, then a higher cash reserve level may not be desirable. If it has less diversification or is in a very cyclical business sector, then a higher reserve might be desirable.

The goal is to keep a pragmatic amount of cash available at all times. Certainly keeping 50% in cash is going to be conservative for most mutual fund or ETF type investments. However, if used in conjuction with "by the book" over a long time of bullish market behavior, it could let the cash build to an impractical level.

If you don't plan on using an upper limit to the cash reserve, then you can start with a slightly lower level of cash. If you're going to use an upper limit, then starting more conservatively makes some sense.

You'll get a feel for this after running AIM accounts for a while. It takes a few market swings to get a feel for how the mechanism works and what sort of 'shock absorbers' are appropriate for the investments you choose.

Best regards, Tom