A.I.M. Users Bulletin Board

[lostcowboy]

Hi nmheifer, welcome to Investorshub, and welcome to the AIM user's board. I see that this is your first message.
Being that I don't know how much you know about AIM or the market, I will explain as simply as I can. AIM is a long term investing method, not a short term one. Right now (short term) you should be seeing your aim system generating buy orders. The reason for this is that we are in a down market or(bear market), around 80 percent of the stocks on the exchange lose equity value. Note you should be able to find 10 to 20 percent that are going up!
In the 1970's about 90 percent of the stock market books were about short term stock market systems. In the 1990's 90 percent were about short term stock picking systems. Most of the people that followed them ended up selling their stock at the wrong time (buy high, sell low). The reason they did this was due to psychological pressure, if you see your nest egg shrunk by 50% you would want to get out of the market too. But what if you had a defensive tactic, You may be able to withstand the pressure, and hold out until your stock recovers.
Types of defensive tactic's
Short Term:
Buy a put option on your stock.
Sell stock short,and buy back at lower price.

Long Term:
Buy a long term put (leap) option on your stock, if able to do so.
Have a large cash reserve, that you can use to average down with in your stock.
AIM, uses the averaging down tactic. If you start a AIM program with 50% stock and 50% cash Your stock can lose 50% of the starting price before all the cash will be invested in the stock. A 66%/33% should last a 30%drop, and a 80%/20% should last a 20% drop. You can use this to help you pick your stocks.
Look at your stock's history, from the last bull market to the last bear market how much did it drop? match that up with the stock/cash ratio's to use.
Mr. Lichello did not get into stock selection to much, he just said pick stocks that you know will still be there when the dust clear's! He recommended mutual funds and Blue chip stocks that pay dividends.

All the examples in Mr. Lichello's book show you starting out at $10,000. However he did not have the tax advantage of IRA's, If you have money in a IRA, and you are using a mutual fund and a money market fund. I think you could get away with starting a AIM program with $5,000.
Note: if you do not have $5,000 yet I recommend going here http://www.investorshub.com/boards/board.asp?board_id=966 To look at other ways to invest. Note: that's my board.