Replies to post #44106 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Just own an S+P 500 fund

Hmm! Late 1990's high tech sector weighting, the bursting of that bubble dragged down the whole index. 2008 financial crisis and financials were excessively weighted, dragged the whole index down. A problem with the largest is they have no automatic take-profit point, you ride 'em up and down again. Mid cap has entry/exit points at both the top and bottom. Ride 'em up, eject them into the large cap. Also captures those on the way back down again, but by the time they drop into the mid cap much of the 'revaluations' will already have occurred.

For simplicity I pool my cash

+1 but for 'cash' using something like https://tinyurl.com/w3kqt3t (but where I'm using a 3 to 5 year ladder for the 'bonds' given current relatively low yields). The State borrows money (sell Treasury bonds), but also can steer inflation (print/spend money so all other notes in circulation are devalued), and set tax rates. Drive higher inflation, higher taxation of nominal gains and a bond that paces 10% inflation in gross terms could be down -3% in real terms after taxes (or whatever). A form of partial defaulting - without actually being seen to have defaulted. I mentally consider stocks and bonds to be at opposite ends of a barbell, along with cash in the middle/fulcrum and that balances well. In effect take the rewards from the best asset (stocks or gold), partner the other asset with cash 50/50 to dilute down its downside. Some go with long dated treasury or inflation bonds (TIPS) instead of gold, but I prefer gold myself (UK and legal tender gold coins are exempt from capital gains tax, same as in how you're not taxed on copper price value fluctuations on penny coins). Physical gold can have wide spreads however, so a gold ETF for liquidity/trading, physical for core holdings. Buffett says gold is unproductive, however over time with rebalancing you tend to acquire more ounces of gold in your safe/storage - as though gold dividends had been added. Gold can be difficult to hold however, feels like a drag factor for much of time, but when a big hit against stock does occur having just a third exposure to that, along with a third cash and perhaps 33% gold allocation moving in the opposite direction - might be a saviour (stocks halve, gold doubles type event).

Clive

[Vitaali]

Hi Toofuzzy!

Thank you for good advice about setting up a portfolio.

"Even AIM with just the S+P 500 will do worse in an up trending market. But the losses will be less on the way down."

Market crashes or corrections are not the norm, but rather an exception. They rarely happen. And when they do, prices always recover. Who cares if the TEMPORARY losses are more on the way down? We'll just have to tough it out.

Has anyone done a statistical analysis that tells what gives better long-term returns across meny sectors/industries, Buy and hold strategy vs AIM?

If we have a long-term outlook, maybe it is financially more productive to deploy a buy and hold strategy?