Hi Neil, "So, is the rule basically, after 1 buy, wait for a month before further purchases, except if you get a sell in the meantime (would have to be pretty volatile)?"
I'll modify it to say 30 days just to be clear. Generally this is the way I've been handling my individual stocks.
I've also been playing with "additional discount" as an added filter. I've been playing with 5% and 10% so far in real time. I use 5% for less volatile holdings and 10% for the lower priced, jumpier ones. Let's say our last buy was at $10, then the next price buy point would be $9 or a 10% discount from the previous buy. I ask AIM how much would be purchased at that price and use that as my next order size when placed 30 days later).
The discount procedure is to help make the Purchasing Department a bit more efficient. The level of the discount is dependent upon the personality of the stock or fund, so it's going to be hard to define.
My first example has been STKL. Right now it's slightly above its recent lows. I staged the buys at 10% additional discounts from previous purchases. In this graphic you will see AIM's suggested "next buy" price is $5.09, but since my "last buy" was at $4.65, I won't enter a GTC order for anything higher than $4.18. At that price AIM's going to make a whopper of a buy compared to what it would buy at $5.09.
Note that the time delay gave us a deeper discount on our last purchase than even the 10% filter would have demanded.
The price/share peaked at over $10/share and dropped more than 50% to its low. We nearly exhausted the cash, but not quite. I started this experiment after experiencing three buys within three weeks in 2004. Don Carlson was instumental in getting me to think about this. As you can see in the chart, this helped me to have the cash reserve last through an 18 month decline in the stock's price. Also note that the buys were quite large as they occurred.
The jury is still in deliberation on this one. If/when the stock recovers and we start pulling out profits we'll make a decision on other stocks in my portf. Right now it appears that the cash was used more efficiently as the Ave. Cost/share decline with each purchase was better than it would have been without these restrictions of time and discount.
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