Replies to post #37705 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Hi JDM, Re: AIMing bond funds......................

I'm not sure how others handle these, but I treat them to the settings that are similar to Lichello's AIM-Hi. Generally I don't want these to trade too often as they are for income, not growth. So, what I really want to do is clip off the surplus nearer extremes and add more shares to lower the average cost/share and increase the average yield near market lows.

AIM-Hi looks at 10% SAFE on both the buy and sell sides AND wants the minimum trade to be 10% as well. That creates a Hold Zone of nearly 40%. That's a bit extreme for even the Long Bond funds. So, I use 20% SAFE on the buy side and zero on the sell side and reduce the minimum trade to 5% of shares for selling and 6% of shares for buying. This brings the Hold Zone back to about 30% which is usually just about right. This gets rid of trivial trades and concentrates the $$$ when the best signals are reached.

Further, generally I put a cap on the maximum allowable buildup of cash. For the long maturity treasuries I use a max cash of 20%. For more speculative corporate bond funds I generally use 30% maximum cash.

Here's TLT, the long maturity treasury bond fund from I-Shares:

As you see, it's a pretty big hold zone ($99 to $132) but as the history shows, this is a workable range. While it isn't exactly taxing to keep up with such a nominal amount of trading, the trimming and backfilling does slowly enhance total return without upsetting monthly cash flow very much.

Hope this helps,

[Toofuzzy]

What Tom said.

Toofuzzy