Replies to post #33895 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

Over enough time, AIM will hold less stock weighting, but the average cost of that stock will be low. Which is much the same as having bought that amount of stock at a relatively price level. Stock bought at a relative low often goes on to make way above average gains over the longer term.

Vealie's have the effect of saying - no, I don't want less stock at a low average cost of stock, instead I'm happy to sit here at the average (fair) price cost of stock level, and holding more stock. To accomplish that, when AIM signals to reduce stock (sell), the Vealie overrides that - as though you sold the stock but then immediately bought it back again, and at a time when AIM was signalling a sell.

Its better IMO to follow AIM's advice and let the stock exposure decline, and then periodically remove some of that cash from the AIM and use those funds to start a new AIM (or maybe add more to the existing AIM at a time when the AIM was indicating a buy).

[The Grabber]

Hi Clive:

classic AIM automatically steers more of funds out of stocks and into cash.

I don't think that is the way RL's 10, 8, 6, 5, 4, 5, 6, 8, 10... ends up.
I don't have that in front of me but I seem to remember that the % of holdings bought or sold remained the same at each price as that cycle repeated itself over the 6 years in his example. Of course since PC never dropped, those transactions got huge! Compounding is a wonderful albeit 'scary' thing.

Now what you say may actually be true in real life though. If so, that may explain why AIM programs tend to slow down (my observation) ater a few cycles.

Also, we must all be bad stock pickers because all we seem to talk about is not having enough cash, not too much! :-)

[Conrad]

OK Clive, I agree 100% that the initial price is not not really relevant in the long run. . .it is a bit like exponential weighing in a running average. . .prices from the past are less and less accounted for on new price information, although it is not the same process.

Only the last few points you mentioned flew over my head. . . no need to explain further.
Thanks