Replies to post #92 on AIM UK

[ls7550]

My overall personal style is broadly to allocate one third of total funds to each of Stock-like, Bond-like and Managed Futures.

Periodically I rebalance back to around one third each levels as and when sizeable deviations have occurred.

I further divide the stock and bond components into stock (or bonds) and cash elements along the lines of AIM. I used to use classic AIM but have evolved my personal style to along the lines of Ladder (which is somewhat similar to Don Carlson's EZM).

For example I consider the likes of CHY (which Tom holds) to fall into the Bond category. I actually hold some CHY myself for currency diversification purposes and the recent declines in the UK Pound have helped reduce recent losses in that holding.

I seek low correlations across the Stock/Bond/MF blend, for example



shows recent correlations between stocks, bonds and managed futures styles.

I prefer to manage my own Managed Futures style as the likes of RYMFX have quite heavy charges which I prefer not to pay.

My bespoke MF style is based on a stop-loss style, so typically it has low downside correlation to stocks, but has a positive upside correlation.

For stocks I generally hold a widely diversified range of individual holdings with no one holding being too large a proportion of the total. That way if any one stock fails then it represents only a small proportion of the total.

I rebalance those holdings back to near equal capital weightings as and when any one stocks value is around 1000 UKP above the median. So for example if I initially invested 5000 UKP in each of 20 stocks and later one stock holding was valued at 6000 UKP then I'll sell of 1000 UKP worth of that stock to reduce the holding back down to a capital value of 5000 UKP. The proceeds from the sale are either accumulated until a total of 5000 is available to add another new stock to the set, or possibly added to another stock whose value had perhaps declined to 4000 UKP.

[lionhead0]

Hi Clive, RE: I-Box

Thanks for your reply and explanation with links! Now I know what's inside the I Box and how your ladder works. IMHO, you're on the right track with your modeling protocol. I don't think the V-wave is the best guide to use for the AIM cash reserve as it leaves out some components of stock returns.

Those components are: P/E ratios, dividend yield, earnings growth, bond market credit spreads (stocks vs bonds), inflation/deflation, and volatility. As you develop the I-Box you may want to consider the additional inputs.

I'm very much a "chart" person, as I like the visual presentation of data vs tables or spreadsheets. I've been a technical analyst for 4 years with much study into market cycles and proportionality. I think the I Box P/E or composite graphs likely follow the natural order of things re proportionality, thus secular cycles can be isolated from the trends.

Well, I can see I have my work cut out for me in developing the database for the P/E ratios. Since as you note, I wave has been taken private, the historical data will need to be done afresh whether using V/L or another indexing scheme.

Best regards and good luck with the I-Box. I'll be closely monitoring it as you display it. The ladder is an outstanding idea to make the cash reserve relative to the divd yield metric. Congratulations, you've pushed the envelope out in incorporating that into the I-Box!

Tim