A.I.M. "In Depth" Q&A

[OldAIMGuy]

Hi C, Re: AIM and Investing versus periodic savings plan........

Some confusion always seems to occur relative to AIM. If you divide one's thinking into two areas, it helps. One area to think about is a nestegg that has already been accumulated. AIM is a creation for that sort of investing. In other words, it's a management tool for taking care of an established sum of money.

The other area to think about is the "accumulation" phase. We all essentially started with zero money to invest. It may take years to set aside enough $$$ to build up an account that AIM can manage. So, there are other ways to work one's money during the accumulation phase.

LostCowboy mentioned Twinvest and Synchrovest as two methods of accumulating $$$ over time. Those are for systematic accumulation and investment. Both attempt to be the granddaddy of them all, Dollar Cost Averaging (DCA). DCA is also a systematic accumulation method. It's simple/stupid but works better than your average emotional investor. Twinvest and Synchrovest both can do as well or better than DCA over time with less risk. All three are meant for the person who can set aside $50 or $100 or $??? each month or quarter to build up a sum of money to be managed.

AIM kicks in when the sum of the accumulation phase becomes large enough to justify the internal trading costs of management. As Toofuzzy mentioned, it is usually considered to be a sum of about $10,000.00 total of investments and cash that will justify AIM being the manager.

So, while you are in the accumulation phase you can take this year's 300 Pounds and start building a diversified portfolio for yourself. Let's say you decide you want a global portfolio that is partially "income" producing and partially "growth" oriented. Take this year's contribution and invest in a mutual fund or exchange traded fund that satisfies a part of you eventual overall plan. Next year, after you've accumulated a bit more, buy the next piece of the investment plan. Etc. In 5 or 6 years you'll have a portfolio that is well diversfied and satisfies your overall long term mission and portfolio design. This will be your "Core Portfolio."

By the time the core portfolio is built, you'll probably have accumulated enough that the total can be turned over to AIM for management. So, you are in Phase One - Accumulation now. Buy one piece of the overall Core Portfolio this year. Eventually you'll reach Phase Two - Management of that portfolio and will use AIM on the whole of it.

Best regards,