Hi, 2040,
On the main AIM board, Alton recently posted this:
BTW, has anyone ever compared AIMing to Constant Value professed by Pruveen Puri? Constant Value is the way I decided to go for individual stocks and AIM is the way for ETFs and Index Funds representing multiple equities.
to which I responded:
Hi, Alton,
I got Mr. Puri's book a few months ago. Interesting idea you've got there to use both for different investment classes. As long as you're willing to accept individual stock risk, the approach seems reasonable.
As for me I'm working a "fund of funds" if you will, 20 CEF/ETF's across various categories and types. Rather than a constant value, I use instead a constant ratio, i.e., I adjust the balances to keep each of the 20 holdings at 5% of the total value. This by adding additional money or partial selling of those with the furthest value above 5%, reinvesting the proceeds back into the laggards.
Which as a way of background, brings us here and to your post, thus:
I'm interested in aimsters plan of having mr. puri plan put into action. I don't know what question to ask but perhaps for asking about greater details. Do you use aim to make buy and sell decisions on various etf or just a percent rise. how do you deal with new money comning in to your account what would I buy the lowest performer or a new etf? Any examples you offer will be helpfull.
Mr. Puri takes what Toofuzzy would likely call a very slow AIM approach. He buys a stock at a fixed dollar amount, then re-balances to that amount once-a-year, and only if the percentage change is above or below a given rate. Also the slow rebalance rate makes any tax consequences the long-term variety. He's able to save that amount each month, so he'll research and buy a new stock each month, holding off buying new stocks only if he sees he'll need more cash to add to the existing holdings at the year-end. So, he claims in this rather slow fashion to build up a portfolio at a theoretical maximum of 12 stocks per year. He reports that one must do constant due diligence, as one wouldn't want to be holding an Enron.
For me a question is how many stocks do you want to manage this way? Follow this idea and in a decade you could have 120 to manage. Not too excessive, I suppose, but it does seem to me to be a lot of work, even if you are only executing an annual rebalance plan.
Which is where, as I mentioned above, I like my fund-of-funds and keeping the fixed percentage. I suppose I could take the idea of rebalancing to the highest value in the 20, but it seems to me that that over time would favor the most volatile funds, increasing risk, as opposed to trying to keep things more or less on an even keel.
Of course, Clive's suggestion of Harry Browne's permanent portfolio being composed of a mere four elements is about the ultimate in simplicity if you really want something to be a "no-brainer," I find that too micro for my taste and find that such misses whole groups of asset classes.
So, there's quite the range out there. The point is to find a plan that works for your situation and then follow it.
Best,
AIMster
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