AIM is a behavioural tool. Many investors underperform the average (Index) due to human nature/emotions (buying when prices have been rising strongly, capitulating when prices have dropped a lot). As such even just achieving the average (Index) in practice is a win.
Apply standard AIM as originally detailed in the earlier editions of Lichello's books i.e. 50% cash, 10% SAFE, monthly reviews. I'd suggest also using the later choice of a 10% of stock value minimum trade size - as that trades less often for broadly overall similar rewards (i.e. is better on a after costs basis).
For the backtest use Shiller's inflation adjusted monthly price only values as the AIM price, and ignore dividend and cash interest. Using inflation adjusted price data is OK for such backtests as you're not actually trading, just measuring.
Such a test will highlight how AIM overall achieved the same gain as buy and hold, but did so with a average of 38% cash. i.e. both achieved around a 2% annualised reward (which being based on inflation adjusted figures reflect a 2% annualised real gain).
At times AIM was all-in (100% stock, no cash), at other times close to 70% cash - such as at the peak of the dot-com bubble. At the 2009 lows AIM was indicating 20% cash. For 10% of stock value minimum trade size AIM traded 111 times over the 145 odd years. For 5% minimum trade size the overall gains were similar - but AIM traded around twice as many times (something like 245 trades over the 145 years). Broadly trading larger amounts less often is the more cost efficient.
Adding in consideration of dividends and cash interest over those years also into the equation : Dividends averaged 4.2% and one year cash interest rates averaged 4.7% (simple yearly (arithmetic) averages).
i.e. broadly comparable total gains of portfolio value that exceeded inflation by around 2% annualised, combined with around a 4.5% average income (from dividends and cash interest), for a total average of 6.5% real (after inflation).
Some like to maintain multiple AIM's against different assets rather than opting for a single AIM against the broader S&P500 index. Whether one works out to be better than the other ??? Multiple AIM's can provide more fun - possibly for no extra benefit/reward. Lichello more preferred the simple life/choice.
Look at the achived posts at the top of the post list and particularly the QUICK AIM CALCULATOR. It will figure out your HOLD ZONE so you only need to do the calculations when you would have a trade.
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