Replies to post #3011 on A.I.M. Users Bulletin Board (AIMUSERS)

[Bernie Goldberg]

Hi Don,
The method I illustrated L.V. was based on starting out with an AIM program.
It doesn't matter how many stocks you have as long as it is more than one.
You wrote in your PM:
I currently have: RCS=80%, KDD=5%, HD=5%, PNRA=10%. What I have been doing is using individual fund AIMing, and rebalancing the funds to the above percentages once a year(after Jan 1).
with the predominance of RCS in this basket, the moves that are made by the other three stocks would be irrelevant. The stocks in the "basket" should be fairly equal in value. I am going to take the liberty of changing the word "basket" which is used so often here, to fund.
If you examine the portfolio of most Mutual Funds you will see that most funds will rarely have more than 5% of their portfolio in any one position. I realize that this would not be satisfactory for most AIMers.
RCS over the last 2 years has increased in value by 35% in addition to paying an 11+% dividend over that period of time.
If you had started your AIM fund 2 years ago with the same proportions of stocks that you have now, AIM would have had you reducing your holdings of RCS and adding to your holdings of the other three. Since RCS is such a predominant holding, it is highly unlikely that you would have ever had a buy signal from AIM.
If however you would have changed your holdings to 25%/25%/25%/25%, you might see some AIM action. I'd like to add that since RCS is an income producing stock, it doesn't make much sense to put it in with growth stocks as part of a fund. It would be more logical to treat RCS as cash reserve with your other 3 stocks having a 33% slice of a 100% pie.
Another choice would be to make two AIM funds. You could take RCS and ACG and make an income producing AIM fund with equal amounts of each, and another growth AIM fund with the other three at 33% each.
I recommended rebalancing whenever AIM recommended a buy or sell. When AIM said sell I would reduce the position that was higher in value. When AIM said buy I would add to the postion that was lowest in value.
Hope this helps.
Bernie