Replies to post #33900 on A.I.M. Users Bulletin Board (AIMUSERS)

[ls7550]

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 latter option going to reduce your average cost even further. Good idea!

I like the idea of combining Fama/French's 3 dimensions (three factor model of small cap (growth) and value (defensive)) with that of IFA's fourth dimension (3 factor + treasury's) into a form of Larry Swedroe's Fat Tail Minimisation. But with a 5th dimension of AIM and a 6th dimension of treasury ladder.

$100K total. 50K into a 50-50 AIM of Small Cap Value. Keeping all 'cash' in a 5 year treasury ladder. 25% stock that can expand up to 50%, 75% five year treasury ladder. Manage AIM as normal (no Vealies), but periodically rebalance at the outer layer, preferably adding to the AIM at a time when AIM is indicating a buy, reducing the AIM at a time when AIM is indicating a sell.

Add in a 7th dimension of switching 15% (one year of ladder) of funds out of the treasury's into gold at times when gold was in relative strength (based on yearly reviews, i.e. using the most recent ladder step maturity to invest in either gold or the 5 year duration) and switching out of any held gold back into treasury when gold was in decline/relatively weak, and overall the results historically have been reasonable, with very low levels of risk - a Japanese version would have churned out 5.5% annualised gains (2.5% real) over a period (1972 onwards) when their stock investments had performed dismally. At times when gold was on the rise, the set is also a bit of a Harry Browne Permanent Portfolio type blend, but a little lighter on gold and holding a 5 year treasury set instead of a short and long duration treasury barbell.

With just a one stock (ETF such as VISVX) AIM, and just a relatively small amount of exposure to that (25%) the expense ratio relative to the total fund value is small and the management effort is very low (monthly AIM reviews and once a year treasury ladder (or gold) rotational trade + total fund rebalance).