Hello Jibes,
I thought I had a theoretical problem with AIM ReBal. But as long as you dig up example portfolios that do well, my theoretical problem was having a problem. So I looked twice, and found that AIM ReBal is very nice, theoretically!!
What is the problem? When you AIM a basket of stocks, AIM likes a volatile basket, preferably built from positively correlated stocks. Rebalancing, on the other hand, thrives on negatively correlated or at least uncorrelated stocks. Big problem! Or not? Actually, we never get perfectly correlated stocks, either positively or negatively. So part of the action in a portfolio is positively correlated, the other part uncorrelated or negatively correlated. When all stocks go down or up, The AIM part of AIM ReBal gets a chance. OK, so far so good. On the other hand, when the action in your basket cancels out, AIM advises to lay back. AIMers that would have AIMed the stocks individually might see plenty action however. AIM ReBal is saved by the ReBal part, because it sells winners to bolster up the losers, exactly what AIMing the individual stocks would have accomplished. Of course, you have seen this all the time. It's just that I have now worked myself towards seeing too!
I think this is a very interesting way of AIMing a basket of stocks, and one of the more inspiring AIM variants I have seen. I see you have started your own thread on AIM ReBal, but certainly, the discussion wouldn't be out of place here!
Thanks for sharing your idea!
Karel
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