Replies to post #44182 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Vitali

Start with the same securities with 80% cash in 2000 and 2006 and see how much cash you end up with at the end of 2002 and the beginning of 2009 and then get back to us!

You can always put some of the cash in a short term bond fund.

Not Always
Toofuzzy

[OldAIMGuy]

Hi V, Re: Excess Cash build-up during extended bullish periods...........

You might find some value in reading this from my old AIM-Users web pages:
http://web.archive.org/web/20120118093621id_/http://www.aim-users.com/aimchng.htm

It addresses this issue in various ways. While it's an old bit of writing, I've used these general ideas for over 20 years with good success. The periodic market mood swings have managed to empty the cash drawer a couple of times. That has put me back on equal footing with the Buy and Hold investor and improved the overall performance.

There's also here on i-Hub some useful information in the Q&A pages:
https://investorshub.advfn.com/AIM-%22In-Depth%22-Q&A-992/

Let me know if these help,
OAG Tom

[OldAIMGuy]

Hi V, Further thoughts on cash build-up...............

Take a look at this post I shared recently. The overall performance is good and was accomplished with discipline basics from AIM in conjunction with discipline trading techniques I've used for decades.

https://investorshub.advfn.com/boards/read_msg.aspx?message_id=153483230

You could compare trading GNRC with AIM "by the book" to see if there is reason to pursue the modest changes I use.

OAG

[ls7550]

AIM has a broad natural tendency to decrease the number of shares held over time, in effect profit takes to dump the gains into cash. That's amplified further if dividends are also dumped into AIM's cash.

For a retired individual that is drawing income from that cash reserves that tends to balance out if dividends are being reinvested into shares/stock.

For accumulators, AIM's cash will tend to expand. Options include allowing cash to build up and then starting another AIM (further diversify the portfolio); Or to use Vealies where instead of selling shares you just increase the PC by half the value of the shares that would otherwise have been sold by AIM (without actually selling shares). A extension of that is to use the vWave and if your cash reserves are already higher than suggested by the vWave and a AIM sell trade is being indicated then 'pull a vealie' (otherwise sell the number of shares/value as indicated by AIM).

The vwave can also be used to assess whether current AIM cash reserves are too high and if so add to a existing AIM or start a new one.

For backtesting, the vealie is the simplest to 'code', if AIM cash > 50% and AIM is indicating a sell trade then leave the shares as-is and increase PC by half the AIM indicated trade value, otherwise apply the standard AIM rules. But that's not as good as using the Vealie that might be suggesting that perhaps 66% cash might be a reasonable cash reserve level ... or whatever.

Alternatively, depending upon what you 'deposit' (invest) AIM's cash in, then you might be OK with letting the levels of cash rise to relatively high levels. One of https://tinyurl.com/ssmhzk9 for instance as AIM's 'cash' (that third one is like a Harry Browne Permanent Portfolio but where instead of 25% in each of Short Term Treasury and 25% in 20 year Treasury I just lumped 50% into 10 year Treasury). The second is a form of Ray Dalio 'Safe' choice. The first is my personal preference (as a UK investor a third each in GB Pounds Treasuries, US$ stocks, and gold is a form of three way 'currency' diversification. Blend that first one 50/50 with stocks and ... https://tinyurl.com/t8uyf9z

Clive.

[Adam]

Hi Vitali,

You have some good answers from others and I'll add my take on this. First I go for 20% cash like per Lichello in his later edition. I have a diversified portfolio with many AIM programs and I'm still able to add to my account so I find the 20% is plenty. I have one cash supply to feed all my programs, most of which are ETFs, and are unlikely not to recover over time. The 20% is in either money market fund which yields some 1.8% now and in high dividend ETFs that are not very volatile. In that way the "cash" does not act as too much of a drag on performance.

The Vealie is a good idea as it reacts to facts on the ground, but I've been using a different method of limiting cash buildup in bull markets in diversified ETFs. I increment the PC by 10-20% per year so my hold zone increases in time. This has worked really well in the current sustained bull market. I'm using the old AIM spreadsheet and it was easy to add another column with the % /year increment in PC.

The Vealie and/or incremental PC are also a good way of increasing the size of your AIM program during a rising market without adding cash to it.

A lot depends on the size of your portfolio, the number of ETFs you have, and whether you need to take cash our of your account or are adding to it. I always advise to stay away from individual stocks with AIM as it's too risky or at least keep those to a small fraction of total account.

Adam