The "Stock Trading Riches" Investment System

[OLD NO.7]

Aim Hier

"I would assume the investor bought $2,000 AMZN, and set up a 30% cash reserve, or $600"

Actually you needed about 49% cash reserve at the start to not have the cash column go negative but who's counting it's only money. And you are right I would be hard pressed to hold a stock that lost so much. Stocks do go to zero so I agree with you on the low cost ETF's. To be fair it is only an example used in Praveen's book but his chart made no sense to me so I came up witn a spreadsheet that did make sense and it matches his returns.

I don't think there is any harm in using a pool of money as cash for multiple holdings but you still need to account for the cash used in each account where in the AMZN example should have gone to (-) negative cash. Oh well I enjoyed reading the book but I can't go into a zen state and only look at my holding once a year and I do realize you could do it on any schedule as you do AIM. I do prefer AIM over the constant value method but to each his own.

For money you don't need for five years there are some asset classes that never lost money in any five year period going back to 1972 up to 2008 (not including 2008). Those would include mid cap blend (VO), large cap value, REIT's (VNQ), small cap value (VBR), and a few others that only had one five year period with a loss of less than 1%. When you are retired as I am those things matter much more than when you are in your 20's to 50's. Here is the site where that data came from:

http://assetplay.net/financial-tools/backtest.html

Larry G