Replies to post #39102 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Hi Allen, Re: Commission cost as a percentage of Order Value......

Generally I used to attempt to keep the commission cost at less than 1% of the trade order value. That would mean a $1000 trade as a minimum at TD. To go from your current trade amount of $185 to $1000 would probably put the "next sell" price well beyond its suggested sell price/share and negate the trade.

Remember that you pay commissions in both directions, so 5% in each direction would eat seriously into your overall profit. Keeping track of the gross and net cost on transactions will help guide your hand. Ameritrade's Gain/Loss page can help, too.

If you and AIM are making just $15 on the trade and AMTD's making $10, that's not a great ratio. :-) Of course much depends upon the way you calculate profit - LIFO, FIFO or Average Cost. We talk about AIM's LIFO gain target being ~20% to 30% generally, but we don't pin that down to dollars very often. That would be ~$100 to $150 on a $500 trade. Even there the $10 commission is a big chunk of the gross profit.

So, order size matters on commission based trades. There are some "fee based" brokers around and if you're a day trader they might work okay. To pay 1% to 1.5% of the value of the portfolio annually as a fee would require a lot of transactions to pay for itself, but if there were going to be dozens of small transactions it might work.

Over the years I think I averaged less than 1% total commission cost on a round trip basis. That required trade values above $2000 per transaction if I remember correctly.

Hope this helps.

[Adam]

Hi Allen, I'll take a stab at the first question and leave the rest for others. I would not make such a small sell ($185) unless you want to close out a position to simplify your portfolio.

The expenses are much worse than 5%. Let's say you made 20% on the sale, so you bought the shares for $154. You made $31 and paid $20 in commissions, that's 65% in expenses.

If the trade was made in a taxable account the net gain is even worse.

[karw]

Trading costs,

At this moment I use a broker that charges 50 cents plus 0.01 cent per share per transaction in New York. So the trade of 15 shares at 12.335 could be done. 15 shares would mean a fee of 51 cents, so two ways is one dollar.

So you can have a lot of different individual shares without using LD-AIM.

Also ETFs can be traded for free, so the buy and sell size could be 1 share. Using the parameter settings (10,10,6,5) you basically have a 20% hold zone when trading 1 share per transaction.

This is a Dutch broker, but surely you have equivalent price settings in the US.

Best,K

[Toofuzzy]

Hi SF

TD Ameritrade has 100 ETFs that you can trade for free at most monthly. I am sure you can find enough AIM candidates from among them. It makes no sense to trade less than $500. I would combine accounts and have fewer, larger positions, even if that was one S+P 500 fund and one bond fund to start. I would not start any accounts with less than $20,000, half in stock and half in cash.

On something like MORL or MORT the dividend creates a large pressure to keep the price down. You might want to reduce the PC by 1/2 the dividend amount to reduce buying if you find yourself buying too much. Alternately you can do what I do with my Low Down Aim accounts where I increase the BUY SAFE by 5% with consecutive BUYS and reset when I have a SELL.

If the dividends keep up with the buying, maybe you do no adjustments.

I own REM at the present time And I think I decided I like MORL better than MORT. I may buy MORL when mortgage REITS crash.

Toofuzzy