A.I.M. Users Bulletin Board

[ls7550]

AIM is a bit like a Martingale betting system - where you start with one unit stake and double the bet size each time you lose and close out and restart again when you hit a single win.

In bets other than stocks you run the risk of long series of losers making the bet so large that you exhaust cash reserves. With stocks however there is a finite limit.

Start with $40 stock, $60 cash and if the share price halves that stock value is then worth $20. Add the $60 cash to that (buy $60 of stock) and your stake is now $80 (double the original $40).

Provided you invest in a major/diverse fund then the prospects of the next step down of a zero share price is nigh on impossible, so its just a matter of waiting for the price to revert back up to the original start date price level - at which time the stock value will be $160 (60% up relative to the original total fund value). Or put another way after the stock price halves down from say 100 to 50 and then recovers back up to 62.5 - you're back to break-even compared to the original investment amount.

Best not to rely on just one major index/fund/asset though as even majors can go down and stay down long term (Japan Nikkei for example).

A 40-60 stock/cash initial blend can in itself generate rewards near comparable to all-stock gains, maybe by investing in something like a blend of Small Cap Value/Emerging Markets/International Value for the 'stock' 40% and a Permanent Portfolio for the 'cash' 60%.

AIM does more or less the same but in a more progressive cost average IN and OUT like manner. Generally whatever AIM cash reserve percentage you allocate initially is approximately how far the share price can decline before you exhaust cash reserves, so a 50-50 AIM in having 50% initial cash will generally support share price declines of 50% before exhausting cash reserves.