Replies to post #45324 on A.I.M. Users Bulletin Board (AIMUSERS)

[Adam]

Hi Karw, In practice it's easy to see if your stock or fund is benefitting from AIM. If you see a number of buys intermixed with sells you know that AIM is helping you out. If you see only sells you know Buy and Hold would do better. And the worst case is repeated buys with no sells; this is worse than Buy and Hold. This last is a situation you want to avoid with AIM.

[ls7550]

Hi K.

Compare more like for like. Classic AIM (50% initial cash) with constant 50/50 (yearly rebalanced).

AIM can exhaust cash, 50/50 wont. At times AIM may run out of cash, is more aggressive. IF coinciding with lows then AIM did well, if the priced declined further then straight 50/50 might prevail.

Also, rather than stock and cash, 50/50 constant might opt for assets with opposing correlations, one up as the other is down can be productive. AIM would instead tend to mix both of the assets, perhaps stocks and long dated bonds, each with cash (two separate AIM's) which reduces some of the opposing volatilities.

It's a very close call. AIM however promotes better behaviour. With 50/50 yearly rebalanced in reality some may shy away from rebalancing, bad behaviour, due to greed/fear. With AIM you're more inclined to actually trade in a good behaviour manner. Bad behaviour is broadly recognised as inducing a average -2% lag element and being a average means that for some it was considerably more. Often investors will profit chase, tending to buy high, and then rotate out into the next in-vogue due to relatively poor performance (sell low). AIM'ers are more inclined to be providing the liquidity to such investors.