Hi Aim Hier,
Thanks for your post.
I look at the portfolio level for growth and computing expenses.
Since the basic STR system is to rebalance annually on at least a 10% move, that means that, at most, we will have 1 trade for each $2000 in the account. 7/2000 = 0.35% expense ratio. I think that is low for a managed fund - which is what I consider my portfolio to be. In reality, it will be lower because some stocks won't move 10% in the year and some of the portfolio will be in cash.
That being said, $2000 is the minimum holding per stock or fund my book recommends. Certainly, the expense ratio goes down if your constant value is higher. Also, the 10% value can be increased.
I agree that a flaw of basic AIM is that cash can be a drag, and that the stock market goes up in time. STR handles this at the portfolio level.
In the basic STR system, each individual stock position doesn't grow, but the stock portion of the portfolio grows. So, we cap cash in the portfolio at 30% (you can always adjust the percentage). So, if your cash ever got above 30% of your portfolio, you would add new position(s).
In the STR variations section, there is a rule to increase constant value when the stock increases - basically by averaging the new stock value and the old constant value. Also, constant value can be adjusted manually, so raising it by 6% a year is an option.
STR tries to be flexible, so people can build their own customized system around constant value rebalancing, so that they feel comfortable with it.
Because the main ingredient for trading and investment success is to have a system you like and trust.
So, with STR, you can account for growth at the individual stock level by increasing constant value, or at the portfolio level by adding positions with excess cash, or both.
