Replies to post #24 on AIM RE-bal

[lostcowboy]

It may work better on the dogs of the Dow investment method.

[Qarel]

Hi Jibes,

No problem here, when AIM Re-Bal doesn't prove to be the silver bullet of investing! As long as we have a fair idea what kind of stock and portfolio composition is necessary, things are OK.

Regards,

Karel

[2mc]

Hi Jibes,

Since you're rethinking the Rebal scheme, I thought I'd do the same. I did not fully perform my normal thought processes and checks before I decided to implement rebalancing. So, before my account suffers too much (if indeed it will suffer), I will do some investigation. I will share what I come up with. In these tests I will be using the standard AIM with my modification that I described on the AIM board. I will not be using what I had earlier discussed here. That will be for another day.

To that end I did an initial test. I wanted to test the max that rebalancing can do on its own. So, I set up 2 fake stocks - one with the Lichello series as its price history and one having the inverse.

I started with $10,000 to invest - $5000 in each stock. I rebalanced each month with no minimum investment. The result after 8 years is $2.68mil.

I then AIMed (with my modification) the two stocks separately - each having $2500 invested and $2500 in Cash. This totals $10,000 initial investment when you add the two together. The stock starting at $10 made $967,457 and the stock starting at $4 made $385,287 for a total of $1,352,744 - which is a little more than half what the fully invested 'rebalancing' portfolio made. (This seems to make sense, since it is generally 50% invested.)

Now, what remains to be seen is whether there can be a synergy between AIM and rebalancing or whether they mute each other's performance. We also need to see how rebalancing does on stocks that aren't *exactly* correlated.

I'll be posting the results of my tests as I think through the process.

Matt