Replies to post #29498 on A.I.M. Users Bulletin Board (AIMUSERS)

[AIMster]

My plan is to divide the ammount I will invest in each fund into 3-4 parts and invest the parts gradually. Also plan to have the cash amount equal to VWave. I know we will hit a bottom at some point but my stomach turns over when I wonder when. What a wretched time to be investing! Or will it be a major opportunity? Hmmmmmmmm-

Hi, Cindy,

Your plan sounds reasonable. As to the point at which we hit bottom, as Dr. Who might put it, "well, that's a bit of a question then, isn't it"? Being a time lord he might have an advantage, but he's usually too busy dealing with Daleks and other nasties to worry about making a fortune in the stock market. Probably considers it too much of a purely human endeavor. The new remake of the classic British series is very well done and can be seen on BBC America and the Sci-fi channel. Makes for good escapism in all the current uncertainty. But then, so does "House" with British actor Hugh Laurie working the show with the most un-British of accents. I'd love to see them get Rowan Atkinson in for a House episode as they both worked together in "Black Adder." - So much for my foray into television, now back to our regular AIM show...

On paper I'm sitting on losses, but am using the time to fill in lowering the average cost. I consider this time to be like charging up a capacitor, building up potential for discharge later once the market decides to go back up. If it decides to go back up. - But, the longer in the doldrums, the more potential built up to be realized later. Not as exciting as contemplating one's navel, in terms of a patience discipline, but one could take to thumb-twiddiling too, I suppose. Plan the trade and trade the plan. This is the sort of time that measures us as contrarians - to buy when the rest of the world sells, then to appear foolish later, selling as they're buying the rocket that long ago left the launching pad, only to start heading back down to earth sooner or later...

Hang in there and keep the faith!

Best,

AIMster

[ls7550]

Hi Cindy. I know we will hit a bottom at some point but my stomach turns over when I wonder when. What a wretched time to be investing! Or will it be a major opportunity?

From http://www.indexarb.com/dividendAnalysis.html

recent Dow Yield is 4.3%

Long term historical average yield is 4.5%, so on that measure we're near fair value.

Typically yields swing about that average, from one extreme to the other. We've had 'recent' low yields, so potentially we're overdue for a swing the other way into high yields.

A modest (1 standard deviation) swing into high yields would put the Dow yield up to around 6.2%. At 7.7% it would be touching 2 standard deviation (relatively rare event).

An increase of yield from 4.5% to 6.2% implies a 27% price decline potential. An increase up to 7.7% yield levels implies a 40% price decline. As typically the downside cover of AIM before running out of cash is proportional to the percentage cash reserve, and the current vWave indicates around 31% cash, then that implies a 31% price decline cover before an AIM account with 31% cash exhausts its cash reserve. Which falls in reasonably well with the above yield based figures.

At current price levels you're more likely to achieve the long term average equity total return (stock bought previously at lower yields are more likely to relatively under-perform the long term average).

So the major opportunity isn't with us yet. But it is a good time to be buying stock as more typically stocks spend long periods of time at above fair value level.

Natural tendency is to buy when everyone else is buying (at or towards the highs) and sell out in frustration after losses (towards the lows). AIM helps overcome that human emotion/instinct and steers us towards buying low, selling high. Declines can be stomach churning, however once faith in AIM's ability is established then declines become almost enjoyable (or unemotional - ZEN like investing as TooFuzzy calls it).

Best. Clive.

[OldAIMGuy]

Hi Cindy,



:-)
TV

[Ganaraska]

I'm in a similar position.

Both of us have money to invest but are not now in the stock market.

I'm keeping out until I see a sign that the bear market is ending.

With the subprime mess not resolved no one knows just how far the losses go or who is affected. This will take time to work itself out.

The indicator I am using is a very simple one. Watch when the 20 week moving average crosses over the 50 week moving average. This indicates the end of a bull market and the start of a bear market. This took place last fall.

When the trend reverses they will cross back. This indicator has called every market reversal for the last 20 years.

At that time I mean to get into the stock market using AIM and starting with the cash reserve recommended by V Wave.