Replies to post #41042 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Hi M, Re: AIM's lack of concern relative to "average price/share".........

AIM is designed to take profit on the most recent shares purchased, not
on average share cost. So, it is ambivalent about which batch of shares
are being sold or what their costs might be. Generally the gross LIFO
gain is about 20% to 40% depending upon what SAFE values and what
minimum trade size is chosen.

Even with a LIFO gain, the FIFO or average cost could be showing a loss
for a taxable transaction. AIM succeeds by compounding LIFO gains over
time. Eventually with each cycle your average cost/share will be lower
than your average selling price even if you started at a much higher
base cost.

When AIM sells, even at an average or FIFO loss, it will be selling at a
LIFO gain. It is replenishing the cash reserves with profits attached.
Since cash is the seed stock for the next planting, it is important to
recover the cash whenever it is possible regardless of the tax
consequences. If you sell shares at a tax loss, you will be able to use
those losses against any taxable gains you have during the same year.
This will be good for your overall portfolio even if that particular
holding seems to be doing something "wrong."

The best "Fix" is to just follow AIM's directions and sell regardless of
tax base cost when AIM wants a sale to occur.

Other opinions are welcome..............

[Toofuzzy]

Hi Mvls

It is OK if next sell is below AVERAGE cost as long as it is above lowest cost.

If you bought shares at $100 and the the security crashes to $20 and you managed to pick up low priced shares, Aim may allow you to sell some shares at $35 or $40 which may be below average cost. Selling those shares may give you the cash to buy again if the security drops again. Then again you might wish you dont if it keeps going up, but you never know.

Aim doesnt try to predict the market but allows you to react to it.

Toofuzzy

[SFSecurity]

Hi Mvls, I'm in a similar boat on some positions in the trusts so what I do, for tax reasons in the US, sell the highest priced shares, that way my average price per share goes down after the sale and I get a tax loss against other income. It took me quite a bit to figure out this approach but it has helped keep the taxes the trusts pay to a minimum and last year got a small loss via K1s to the beneficiaries which helped their taxes as well.

The average return on the positions in the trusts on original purchase price was ~9.8%, dividends and sale gains. Though a somewhat complex approach I have been able to dig my way out of the worst of the positions that my mother's broker put her into. His logic, it seems, was she needed income more than stock appreciation given her age. Not totally unreasonable but it left me with some halasish paper losses to contend with and yet significant taxes for the trusts and not a lot of spare cash to pay the taxes with. Doing the sale of the highest cost shares brought in the cash and losses to offset some of the taxes at the same time.

Plus, it made it possible to start AIMing positions such that more reasonable buy and sell prices were there. In once case I would have had to wait until the stock more than doubled to get a sale if I simply used original purchase price as the AIM starting point.

Best,

Allen

[SFSecurity]

Hi Mvls, In looking back I noticed your post about"

but one annoying result is that a number of my sell points ended up being at or below my average cost now. My question is how best to fix this?

What I did, by accident, was to sell Highest Cost and then buy back at the lower price. What happened is that it was a wash sale and it raised my basis over 18% so that when I sold out that position I got a bigger loss to offset gains on everything else.

I'd suggest doing this and then at an opportune moment more than thirty days from the last transaction close that position and use the money to buy a similar position. If you were closing VNQ you might consider XRE. Both are REIT index funds so you maintain the roughly the same exposure. I'm not saying that is the best choice for a parallel fund, just an example for discussion.

In my case I wiped out almost all the capital gains on other positions with the $13,000 boost in basis. My accountant loved it when we went through all the stuff and confirmed the increase in basis. She had me explain, in depth, how it came about. I told her that is was tiredness at work, not intelligence. She laughed and said I might want to repeat it.

Best,

Allen