Hi Jrx
The AIM cash reserve is part of the system, so once you'd exhausted that cash reserve you wouldn't inject additional funds into that AIM for further buying.
In your example therefore you'd have probably exhausted cash at the third buy after the initial purchase (S/N 23)
At that point you'd hold around 153 shares at an average cost of $41.96 and to the end date be around -56% down.
Buy and hold would hold 138 shares at an average cost of $43.38 and be around -58% down at the end date.
Robert Lichello suggested lumping stocks into a single portfolio and then AIM that portfolio, i.e. using AIM simply to identify - as an example - whether 40% stock exposure or 60% stock exposure might be appropriate at a given time and to use your stock selection skills to choose which stocks to increase or reduce whenever AIM indicated a buy or sell.
If you opt to use multiple AIM's, one for each holding, then ideally you need a degree of certainty of mean reversion - and funds (ETF's etc) are more likely to mean revert.
For individual stocks, consider an alternative of constant weighting where you allocate a total amount to a single stock and invest half in stock, half in cash and rebalance back to 50% equal weightings whenever a sizeable deviation becomes apparent. In your example if you opted to rebalance whenever cash or stock had declined to a 40% or lower weighting then you'd have bought 115 shares at an average cost of $34.84 and be -33% down at the end date. A benefit of the constant weighting approach is that you never exhaust cash reserves, but you remain at a (relatively) constant 50% weighting amount. AIM is a similar add-low, reduce-high type style, but additionally scales up (to potentially 100% stock exposure) and down the weightings in a potentially appropriate manner, but it doesn't always work out well - such as if the share price dives and stays down.
Clive.
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