Replies to post #38486 on A.I.M. Users Bulletin Board (AIMUSERS)

[SFSecurity]

Thanks Tom, most illuminating and helpful. I had not thought of it in terms of a (food) pyramid.

Warmest Regards,

Allen

[SFSecurity]

Hi Gang, I just read an interesting book that approaches the "the investment pyramid" Tom talked about in his post.

"The Ivy Portfolio - How to Invest Like the Top Endowments and Avoid Bear Markets" by Mebane T. Faber & Eric W. Richardson, John Wiley & Sons, Inc., 2009. It is available at http://www.alibris.com for about $12 used, or less, including shipping, so don't buy it at Amazon or eBay.

The book uses the extraordinary results that Yale and Harvard had gotten from about 1985 to 2008 for their endowments and then presents a set of possible portfolios in an attempt to mimic those returns. They suggest a 5, 10 or 20 ETFs, equally balanced as a starting point. The five are VTI, VEU, BND, VNQ, and DBC with the alternates to those being SPY, EFA, AGG, IYR, and RJI to use to avoid the 30 day wash rule.

Then they add in a few other possible actions that might be used, momentum using a 10 month moving average, rotation in and out of sectors and some other tweaks.

One aspect that sort of mimics AIM is that when things are not looking good they suggest moving to cash, then buying back in when the SMA line is crossed on the upswing. While this is not as good as AIM at selling while headed to the peak and buying on the way down, they show good results

They give a good overview of various types of investment vehicles, their pluses and minuses and reasons that should be considered such as taxes and opacity before deciding to invest in them.

A very worthwhile read. Also Faber has a blog at http://mebfaber.com/ that is worth looking at. He has updates and charts at http://mebfaber.com/timing-model/. There is also a web site for the book with a suggested reading list at http://www.theivyportfolio.com/reading-list/.

Best,

Allen