Re: Stop Loss
Hi Adam.
Lichello had a poor-man's stop loss in that when you ran out of cash in a particular stock you were supposed to stop buying. Of course then you end up with a dead program and the money you alread put into the program can keep sinking. At best it will sit for who knows how long until the stock recovers if ever.
I've had a few of those that never recover, but since my initial capital at risk is generally 1 half to 1 third of Classic AIM, the final loss could be swallowed without much overall impact on the protfolio. I've also had some that sank (a lot and for a long time) but have come back to produce very nice returns, all while increasing the holding over time and reducing the average price paid. Another advantage of LD-AIM (IMHO).
If someone can implement a stop loss into AIM it would be useful. I'm convinced it would also be a poison to some extent as AIM needs declines to work, so any stop loss would decrease the gains from security fluctuation.
It would not be 'poison' at all IMO. Rather, once the price dropped further than where one stopped out, repurchase (should one still desire) would be at very favorable relative prices. None of this internal 'Sell Short and Cover' approach would need to interfere with the next AIM directed purchase at all, so there would be no impact on whatever AIM decides to have you do with respect to price fluctuation.
Remember, wherever the process ends up, it will still need to be able to work within the overall AIM 'envelope' if you will. That is the challenge I've laid out for myself and whomever else decides to help out in the thought process.
Also in my experience of using AIM for many years I've had several AIM stocks that just sank and failed with AIM, but never an ETF, CEF or mutual fund that failed. Sure some of the funds did not do as well with AIM, but never a failure like stocks. I'm convinced that unless you're dabling with specialized ETFs with questionable future that you don't need a stop loss for AIMing any reasonable kind of fund. With funds when AIM tells you to buy it's quite safe to do so.
Can't disagree with the last sentence on buying when AIM tells you to. I'm not even suggesting that one not 'do as their told' in that respect. Instead, I'm thinking about how one could work within those rules, further reduce risk, and improve results. Not a bad goal don't you think?
As for your comment on funds not failing; I'm not one to agree or disagree with the relative value of AIMing funds of any type versus individual securities. I'm pretty sure I understand the relative risks. But I've chosen to play in the individual securities sandbox. I'm much more successful and comfortable now doing that with LD-AIM than before with Classic because I'm way more diversified as a result.
In effect I own my own managed fund. Now to improve it's operation....
News 
Market Data 
Discover 
AI
