AI
Monday, January 05, 2009 4:58:57 PM
My problem is I just established my AIM account about a month ago using American Century's Vista with a 50% cash reserve. However, your instructions were to sell up to the 50% level in bullish times. But what if you started out at the 50% level,as I did, and you get a market order to sell stock which would raise my cash above 50%.
The point to note is starting cash reserve amount. This is a level at which you feel is prudent to have in reserve, looking at what's likely to happen to the market going forward. Since none of us have a crystal ball that can pinpoint the levels we need exactly, we take a best guess, using, as Tom mentioned, the type of holding you've got, looking at historical highs-and-lows of price ranges to get a sense of how volatile the holding is. The rule of thumb generally here is the more volatility, the more likely you'll need a larger cash reserve. Holdings that trend in a slower rate can get by with a more modest starting amount.
Once you've turned the system on then, so to speak, if it starts giving sell signals, you can either follow them, increasing the cash reserve level, or as I mentioned previously, pull a Vealie if you feel that going over 50% cash reserve is not an appropriate thing to do with this particular holding.
This shows us that until the recent market "swoon" this fund was mainly doing sideways trading, which could mean you could likely get by with a lower than 50% cash reserve. AIM-HI, Lichello's later 80/20 with the 20% cash reserve might be too bold, the moderate 67/33 rate might be better. Of course, since it's still fairly close to the low of $9.14, the question becomes "how low can it go" from here? In the book, Lichello speaks of Twentieth Century investors and Jim Stowers, founder of the firm looking for stocks that act as "tennis balls rather than chicken eggs." Meaning stocks that will bounce back up after a rebound starts. American Century was Twentieth Century back... when it was the 20th century!
So, in terms of direct advice, especially if this is in a tax-free account, take the sale, might as well profit from the market's move, then when it goes back down again on the future instability we're likely to get before all is said and done, invest more of your 50% cash reserve down to a lower level. Increase Portfolio Control by 100% to account for the new cash you've put in, then just let the system work itself from there.
Best,
AIMster
The point to note is starting cash reserve amount. This is a level at which you feel is prudent to have in reserve, looking at what's likely to happen to the market going forward. Since none of us have a crystal ball that can pinpoint the levels we need exactly, we take a best guess, using, as Tom mentioned, the type of holding you've got, looking at historical highs-and-lows of price ranges to get a sense of how volatile the holding is. The rule of thumb generally here is the more volatility, the more likely you'll need a larger cash reserve. Holdings that trend in a slower rate can get by with a more modest starting amount.
Once you've turned the system on then, so to speak, if it starts giving sell signals, you can either follow them, increasing the cash reserve level, or as I mentioned previously, pull a Vealie if you feel that going over 50% cash reserve is not an appropriate thing to do with this particular holding.
This shows us that until the recent market "swoon" this fund was mainly doing sideways trading, which could mean you could likely get by with a lower than 50% cash reserve. AIM-HI, Lichello's later 80/20 with the 20% cash reserve might be too bold, the moderate 67/33 rate might be better. Of course, since it's still fairly close to the low of $9.14, the question becomes "how low can it go" from here? In the book, Lichello speaks of Twentieth Century investors and Jim Stowers, founder of the firm looking for stocks that act as "tennis balls rather than chicken eggs." Meaning stocks that will bounce back up after a rebound starts. American Century was Twentieth Century back... when it was the 20th century!
So, in terms of direct advice, especially if this is in a tax-free account, take the sale, might as well profit from the market's move, then when it goes back down again on the future instability we're likely to get before all is said and done, invest more of your 50% cash reserve down to a lower level. Increase Portfolio Control by 100% to account for the new cash you've put in, then just let the system work itself from there.
Best,
AIMster
Discover What Traders Are Watching
Explore small cap ideas before they hit the headlines.
