Karw, The better Investor?
You wrote:
The AIMer is also selling while the B&Her is not. So when doubling the stock price, the B&Her is ahead more than a factor 2. Up to this point the B&Her is the better investor.
The beautiful thing about this investing business is that we can interpret every hypothetical situation every which way we like to in order to illustrate a point(and use statistics to prove what we want!)
The AIMer in my example did not sell anything on the way up as the stock jumped to double the value(very quickly). The example showed the extreme case. You are right that if the AIMer sells off then his profit is less, but then also his net average investment is lower and the lower profit on a lower investment base increases the Yield. In this scenario one would have to take some sample runs to see how the exact AIM Yield compared to the BH Yield.
I suppose this is more or less what you refer to in the last part of you message.
In real life there are al sorts of options with which we need to consider. The B&H investment could be security for a mortgage. If so, he does not have the freedom to sell of a portion of the portfolio.
Thanks.
Conrad
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