Replies to post #39206 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Hi Ray, Thanks for the review of Core Position type management. It and AIM have many things in common. Zero SAFE and no bump up in Portfolio Control is essentially how this functions.

The good news is there is some volatility capture. The bad news is that the LIFO is smaller. However if standard AIM can't do any volatility capture, then it is the same as investing like Mr. Buynhold.

On primarily income producing investments I find AIM-Hi with lower total SAFE value works nicely. Since we own these things for income, we don't like to sell them anyway. With such things, I usually use the 20% cash starting point as also being the maximum. (some I use 30% and some I use 15%) Something like TLT doesn't offer very many trading opportunities so when they occur, having a higher minimum trade size is nice. We don't bite very often, but we take bigger bites when they occur.

It is my opinion that the LIFO gain on a Sell of an income investment should work toward paying for the lower income of the cash while it is set aside. So, if we were being paid 1% on Cash and 5% on the investment, the LIFO gain should compensate us for the "Time Value" for while the cash is dormant. If the LIFO were 15%, then the cash could sit for something over 3 years with essentially no loss in time-value.

TLT has moved from around $90 up to $128 some years ago and then down to around $103 in late 2013 and now back to over $130. These aren't huge moves, but certainly worth trimming and backfilling for some gains. Since 2013 the yield has improved from under 3% to now being over 3.5% as the portfolio has internally been freshened.

Thanks for bringing up AIM's cousin and how it is both similar and different.

[Toofuzzy]

Hi Ray

If you could combine that with a way to grow the account that would be cool.

I was thinking using a dollar amount as a trigger but then trading a percentage of shares but couldnt figure out how that would work.

Then I thought just sell 10% but buy 12% or more on the 10% trigger

So not only would you buy more shares but a slightly larger dollar amount on each buy.

Just a thought
Toofuzzy

[SFSecurity]

Hi Ray, Thanks for the explanation of you way of dealing with a low range/low volatility position. What you describe is very similar to the "Stock Trading Riches" investment system by Praveen Puri.

As to bring it up here, I think it is great because no one system works for every position or need. The more ideas, the better for all.

Best,

Allen

[ls7550]

To all the forum members I apologize for bringing this method up since this forum is dedicated to AIM

Hi Ray. Robert Lichello started off by suggesting AIM be used to manage a portfolio of stocks/funds, stating that running out of cash periodically was a good thing as you wanted to be more heavily/all in during the dips, replenishing reserves during peaks. i.e. primarily as overall market timing (add low/reduce-high).

Within that portfolio he said that you were free to change holdings whenever you desired, provided that you kept to around what AIM was suggesting as being appropriate overall stock value/exposure.

As such, constant value or suchlike is just as valid for AIM as others and no apologies are required IMO.

AIM'ing a portfolio comprised of low and high beta assets/choices will have one appropriate choice to add to/reduce as/when AIM indicates to buy/sell. But AIM leaves that to the investor to decide for themselves. Similarly at times you might decide to rotate some amounts between holdings despite there being no current AIM trade signal. If a high beta is up a lot, low beta relatively lagging, but there's no AIM sell/reduce trade being indicated its perfectly valid to sell perhaps $1000 of the higher beta and add that to the lower beta.

Originally Lichello didn't specify a minimum trade amount other than saying less than $100 was too little/expensive to trade (on something like a $5000 example stock value amount). In present day terms I'd guess that would be comparable to around a $1000 minimum trade amount. From my own observations no less than 10% of stock value minimum trade size is appropriate if you're reviewing monthly, however 5% of stock value minimum trade size is more appropriate if you're reviewing quarterly.

Catching the larger market cycles (larger amounts traded less frequently) can be as productive as individual AIM'ing and trading relatively small amounts relatively frequently. Of the two the former is more trade costs friendly.

For the retired he proposed that instead of more aggressive growth assets being AIM'd (using AIM-HI) that more stable value i.e. combined stock/bond funds be used instead. If for instance you AIM-HI a 60/40 stock/bond fund then that's akin to a initial 80% x 60 = 48% stock (leaving 52% bonds) holding i.e. close to a 50/50 stock/bond blend. But where part of the move to/from bonds (cash) over time is indicated by AIM and part is defined by the fund manager.

For accumulators, 80% in more speculative (stocks), 20% cash means you're starting off with 25% of stock value available in cash reserves. If share prices drop then proportionately cash reserves increase relative to the lower amount of stock value. Dividends and cash interest added to the cash reserves increases that further.

From prior backtests I've made AIM-HI started from a relative low (with hindsight) kept up quite closely with 100% buy and hold. Started from a relative high and AIM-HI bettered 100% buy and hold. Extend out long enough and multiple cycles typically has AIM win out overall.

Clive.