A.I.M. Users Bulletin Board

[lostcowboy]

Hi Undertakr, There is only one thing wrong with your Coke system, I don't like the taste of coke. If everyone should developed my taste then the company will go bankrupt. I can't take that kind of a risk! lol

About your real question, not sure if I understand them, but will try to answer them.
First I am not sure as to how well you understand AIM, please read http://www.aim-users.com/aimbrief.htm and http://www.aim-users.com/aimchng.htm also on this page you can get a free spreadsheet http://www.aim-users.com/aimware.htm . The spreadsheet does have protection set, but you can un-protect it, and you have the author's permission to change it. So you can test any ideas you may have.

You said Onto a REAL question: Lets say you purchased a really good stock a few years ago at $14 per share. Lets say you jump into AIM with that stock and the stock is now at $50 a share. Obviously, AIM will say sell it all! Take your profit and run! That's if you set the PC based on what your actual purchase price is. However, if you pull the PC to the current price, you're putting, what, approximately 72% more capital at risk than when you first entered into the transaction. How do you guys deal with this type of issue?

I think you are talking about the VEALIE concept invented by Tom, but he is more conservative than your example. He sets it by the Idiot wave or to 50% cash. Also while you do increase the capital at risk, this is capital that you have won from the market, not out of your own pocket.

Just reread your first question, are you saying that you already have a stock and you want to start AIMing it? And that it has gone from $14 to $50 a stock. And you want to know what amount to set pc too? There are several ways to answer this.
First determine what ratio of stock to cash you want to start off with this could be 50/50, or 66/34, or 80/20, or you could use the idiot wave. However you need to compare the stock's current price in relation to its past price history, lets say the 52 week Hi is $52 and the 5 year High is $52, you now know that the odds are high that this stock is close to its top, so you want to sell some stock, to keep that profit. You can now look at the 52 week Low and the 5 year Low, lets say they are $12 each. If you take the Low minus the High, divided by the High. You get a good idea how far a drop, percent wise your stock could take and adjust your ratio that way, this page will help. http://www.aim-users.com/cashburn.htm

You said Another thought I had, is there any benefit to subtracting perhaps 25% of a sale from the PC to keep your PC from going sky high? Has anyone looked into this type of modification to AIM and what it may achieve long-term?

I think this idea, will severely limit profit's, and could easily sell you out of the stock.
Letting PC get larger is not a bad thing! First let me say a little bit about what came before AIM. There was the constant ratio plan, which a lot of people call Re-balancing their portfolio. It works best at preserving capital, with a slow gain. You also have variable ratio plans, which try to do the same thing but give you more gain. All variable ratio plans have a level that they compare the portfolio's value to and then adjust the ratio of stocks to cash accordingly. One of the simplest variable ratio plans was called the Constant Dollar Plan. It was very easy to do, buy some stock, the value of the stock when you bought it becomes the Constant Dollar Amount. When the value of the stock goes above the constant dollar amount you sell some stock to bring the stock value back to the dollar amount, and when the value is less you buy stock to do the same thing. Normally you start with a 50/50 ratio. But the constant dollar plan had a defect which kept it from becoming popular, after several cycles of stock prices, when the stock price had returned to the starting price the ratio was no longer 50/50, but more like 40/60 or 30/70.
In her book Practical Formulas for Successful Investing by Lucile Tomlinson, she explains that this is easy to correct by increasing the constant dollar amount. This could be done at the starting price, but she felt that increasing it would be best done when the stock value was at its lowest.
I myself am sure that at one time Mr. Lichello, read Mrs. Tomlinson's book. The idea's are so close to each other. So you see we do have a reason for increasing PC.