Hi Sven
AIM-HI was Robert Lichello's last incarnation, which starts with 20% cash reserve
With AIM-HI you :
Start with a 80-20 split of stock value and cash
Initially set Portfolio Control (PC) = stock value (SV)
Each month (or quarter) you check AIM's current SV (share price x number of shares)
If your PC is larger than SV, then AIM is considering buying T = PC - SV - 0.1 x SV
If your SV is larger than PC, then AIM is considering selling T = SV - PC - 0.1 x SV
Only actually trade that T amount if T exceeds 10% of SV
Each time you BUY additional shares, increase PC by 0.5 x T
(PC remains the same after each sell).
Don't trade too often, review or trade at most once each month or even quarterly
Boundary Price of Next Sell = PC / ( Number of Shares x 0.8 )
Boundary Price of Next Buy = PC / ( Number of Shares x 1.2 )
A significant factor of investment reward can be attributed to the price paid for stock. Lump in at a relative high and likely longer term rewards will be relatively low.
AIM provides a means to cost-average down the average cost of stock over time (market cycles). In effect buying during dips, replenishing cash reserves during peaks. Replacing older higher cost stock with better valued stock.
If as a simple example you hold three main assets with no/low correlations then at different times likely one will be up, another down ... and other times that might be completely reversed. 20% cash, 80% split equally three ways (26.6% each), might at one time see one having dropped a third $26.66 dropping to $17.56 value. If at that time all of cash reserves are added to that stock then you have enough to double up on the stock (i.e. deploy $20 cash reserve into that stock). Later when a recovery occurs you can in effect sell the original shares to replenish cash reserves leaving just the shares bought at a relative discount ... and you've cost-averaged down the average cost of that stock. AIM steers you automatically towards such trading over time. It won't hit the exact tops and bottoms, but it does tend to average in (out) relatively close to the peak/trough levels. More often you can look back at AIM's trading history and see that it did a reasonable job - all by itself.
Cost averaging down the cost of stock combined with price appreciation (broader general rise in share prices), and reinvestment of dividends will likely provide acceptable overall rewards over the mid to longer term.
Ideally you want to be holding assets that aren't perfectly correlated (the ideal is where as one declines another rises), that individually provide similar overall positive rewards, and that are likely to recover rather than fade away totally. Funds are more likely to survive longer term than are individual stocks.
Some trade AIM frequently - small amounts relatively often, but you can achieve similar rewards by trading AIM less frequently, capturing larger moves/amounts. Monthly or quarterly reviews is a reasonable choice. Yearly revies is too long for the way that AIM works. With more frequent than monthly you're not providing sufficient breathing space for AIM to work well at cost-averaging.
Over time I've come to reduce my number of AIM's down to managing three main assets. Land (properties), domestic small cap, foreign large cap ... holding index type versions of the small and large cap stocks. Foreign provides FX (currency) change (gain/losses) on top of stock gains/losses, which helps reduce stock correlations. Others invest smaller amounts in a more diverse range of individual assets/funds - each to their own.
Welcome aboard.
Clive.
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