If I run out of cash while AIM signals buy, is it prudent to add cash and keep 'buying low'? I know Lichello advises against doing this often, but it seems like the right thing to do.
Hi mike, AIM does not keep track of how much cash you have. That is why it is asking for more cash than you have on hand. Can you add the total amount that AIM is asking for with out upsetting AIM? YES you can.
Example 1: AIM wants you to buy $3,000 worth of shares, but you only have $2000, so you get a loan for $1,000. You would buy the $3,000, and add $1,500 to Portfolio Control. No Problem!
Example 2: AIM wants you to buy $3,000 worth of shares, but you only have $2000, But you think this is such a bargain that you want to add extra money to the stock, so you get a loan for $2,000. You would buy the $3,000, and add $1,500 to Portfolio Control. No Problem! But you want to add a additional $1000 of unasked for money? What to do? Mr Lichello was a ultra-conservative man, that is why he recommends only putting half of the unasked for money into AIM now. That way if the stock should drop again AIM has some cash to work with. Any unasked for money that is put into stock must be added to Portfolio Control at 100%. In he's early editions he wanted you to add 110% to Portfolio Control, But if I remember right in the Twinvest edition he dropped it to 100%.
The same goes for selling stock, if aim asks you to sell stock to add to cash then you don't change Portfolio Control. If you are removing cash or stock, say to buy a boat, then you want to reduce Portfolio Control by 110% of the cash in the old editions and 100% of the cash in the new editions.
Come see me at Systematic Investing group #board-966 lets talk formula plans.
