Replies to post #40131 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Since the 2008/9 crisis I've increasingly thought more about relativity. The cash purchase power of stock (inverted AIM) is a good one IMO. 'Buy' more cash when the stock purchase power of cash is high, reduce when the stock purchase power of cash declines. Never exhausting that potential, as in how conventional AIM never exhausts stock to sell.

Looking back historically many suggest that stocks have performed very well in real (CPI inflation adjusted terms). With technology however CPI has tended to be low/slow, relatively lagged so-to-speak. A robot running 24/7 is more productive than a factory full of manual workers. Relative to house prices and the stock purchase power of housing has been more aligned i.e. in real house purchase power terms stocks have faired less well relatively than is implied by the real (CPI) indicated figures.

Robert Lichello said that you could apply AIM to other things, gold etc. and applying AIM to the stock purchase power of cash is one such variation.

Many investors in stocks have been led up a path. Historical figures indicating that they were making a wise choice. Discount costs, taxes, relativity, survivorship and human behaviour and actual rewards are much lower than what historical published figures suggest. Many are lucky to even maintain the lower CPI based net real outcome after all factors are considered. The Dow (Industrial) for example is oft cited as a example of historic rewards, yet Dow and Jones devised three indexes, Dow Industrial, Transport and Utilities. The best of those (that couldn't have been predicted in advance) is however more commonly now used as a reference of historic 'average' investment reward.

AIM is great for helping avoid the human emotional based cost. Selling low, buying high. Index funds help with avoiding survivorship costs. Minimising cost and taxes yet further helps. The inverted AIM approach would appear to complete the picture. Collectively positioning you to more likely better the average (other investors) after all factors are considered.