Replies to post #1310 on Advanced Automatic Investor

[Toofuzzy]

Hi byculla

With AIM you REACT to the market, you don't need to predict it. It doesn't matter what the market is GOING to do. It only matters what it has done.

Besides, I have it on good authority that, anyone who says they know which way the market is going to go is either a fool or a lier.

But with 100% accuracy I can tell you " It will be volatile "

Toofuzzy

[aptus]

Hello Byculla,

Of course I have my views on where the markets will go (see http://pragmaticinvestor.com/economy/predicting-the-future/ ), however I don't use predictions when actually investing my money.

Although I'm confident the markets will go up in the long run, I don't know when. So I use strategies that react to what the market does rather than strategies that try to predict the markets.

Both AIM and the Pragmatic Investor's Value Trading Algorithm (http://pragmaticinvestor.com/book/ ) strategy react to markets, and that's why I believe they consistently do so well.

In AIM's case, in the short term, a bear market provides better and better entry conditions for purchasing stocks. The danger is that you can run out of cash before the market hits a bottom.

In that case, you should still do well (assuming you've invested in fundamentally strong stocks) but your purchasing won't be as efficient as it could have been. The best way to use AIM is to invest over time (e.g. if every month you add money to your cash reserve and wait until AIM directs you to use it, then even if you use up all of your cash reserves in any given month, the next month you will have additional funds available to AIM).

This fits nicely with the idea of investing the first 10% (or whatever amount you choose) of your paycheque each month.

In a flat market AIM will simply sit there -- just like buy and hold. If your stocks pay dividends, then the dividends will fatten your cash reserves until the markets start moving again.