Replies to post #29499 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

I am using the 50% cash reserve method. Your instructions say in a declining market to look for an additional 5% decline before making a buy. Just to make sure, I take it the SAFE figure would be 10% of the new lower value. Is this correct?

Yes SAFE is 10% of the 'current' stock value under classic AIM.

Delaying purchases until after a further 5% (or whatever) decline has occurred doesn't have a great effect. All that happens is that you're next buy trade will be larger than had you bought earlier. Along the lines of perhaps two lots of $1000 buys occurring after each 2.5% price decline, or a single $2000 buy after a 5% decline.

An alternative to slowing 'cash-burn' might be to compare your cash reserve with that indicated by vWave and if you cash is less than that then simply defer the purchase (perhaps just ignoring AIM for that months review).

Best. Clive.

[OldAIMGuy]

Hi I, I see Clive's already answered your question.

You can take the price discounted by whatever increment you would like and then see what AIM would have you buy at that price/shares. As Clive mentioned, the bigger the incremental discount, the bigger the "next buy" will be.

The "cash burn" rate can be further slowed by stretching out the "time" component as well. Delays of 30 days or 60 days will also slow the rate at which you add to your AIM accounts.

Using a start cash reserve of 50% and Lichello standard SAFE settings, assuming a long, slow decline, AIM will consume the reserve with about a 50% discount in the price/share. So if you started your investment with 50% cash and a $20/share price, you would run out of cash when the price/share hit around $10.

The "time value" of that cash can become relevent with long bear markets. Even though the cash isn't yielding much, it might be paying more than the dividends on some "growth" type of stocks. So, deploying the cash slowly has a slightly better time value because of yield.

An alternative to buying all that AIM says at a 5% discount would be to only buy what you've decided would be a minimum purchase. You'll be "underbuying" but your cash will last longer that way. The pent up buying pressure could be satisfied at a later date as the discount gets deeper and deeper. However, this requires you to then adopt a "timing" mentality which is somewhat contrary to AIM's.

Best regards, Tom

[Toofuzzy]

Hi Investor5001

You should follow the AIM formular (50% starting cash, 10% SAFE and 5% min order size) After a first trade you need a 5% move in the same direction or a 30% move in a reversal for the next trade.

You can check your calculations and determine your "Hold Zone" with the QUICK AIM CALCULATOR (free) I developed which is on Tom's website www.aim-users.com

Let me know what you think!

Even though the calculator will do the calculations for you I think it is a good learning process to do them yourself with paper, pencil, and hand calculator. You can then verify that you and my calculator are getting the same answer.

Knowing the "Hold Zone" means that you only need to do the calculations in a month that a security is OUTSIDE the hold zone.

Toofuzzy