I also read, with considerable interest, some posts on this newsgroup which spoke about the methodology of managing cash in your portfolio as a seperate entry. Can someone pls expand on that in a little detail pls ? (am still a newbie on this so if you keep it simple :), it'll be greatly appreciated, thx)
Hello and welcome.
You'll find Automatic Investor an excellent program for running AIM programs with. Mark's done a great job at implementing the standard AIM BTB (by-the-book) options that Mr. Lichello set up. Further, he's also added (for optional use) the post-Lichello enhancements, Split SAFE, Vealies, etc. The key with this software is flexibility and options, one can use as little or as much of all the features as one wants to, you're not "locked down" in to having to run your programs just one way only.
The one "weakness" in Lichello's system (in my opinion, at least) is accounting for cash. Particularly for someone like myself, still a member of the working world and one who puts aside some money each week for investment purposes. If I were strictly going by-the-book I'd have to invest a percentage of each week's contribution whether or not the stocks are going up, down or sideways. This to me did not seem so efficient and that's why Lichello favors only the infrequent contribution.
So, what to do? I could ignore the cash part that's not part of AIM program's cash reserve, but then the "Portfolios" screen in AI doesn't show my true balance, only the cash that's actively allocated to running programs! Since the investment cycle (AIM buy-and-sell orders) in these might be rather infrequent, and my contributions to the account are fairly frequent, this leads to a greater and greater imbalance between what my account balance shows from my brokerage and what AI tells me the value of all these things are worth!
My solution: create a new portfolio in AI and call it "CASH" or "UNALLOCATED CASH" or whatever name works for you. Choose the "Custom" option when setting it up. Set the "Cash Reserve Percentage" to 100%. This means that this portfolio will only contain cash, no equity side (or running AIM program) involved.
Set it up as being funded from a Cash, rather than Equity entry. Cancel any request to set up the security as there won't be one. For the starting amount I use the amount what's in my money market fund from the brokerage NOT part of any running AIM program.
When I make each weekly contribution I add it via the "Deposit Cash" function. If an AIM program requests a BUY order I'll use the "Withdraw Cash" function to debit this amount. When an AIM program sells I don't touch this portfolio, but rather let the sale increment the Cash reserve in the AIM program. In the Portfolios screen it will then show the cash allocated to the AIM programs and the otherwise unallocated cash here, showing a combined total of all the cash. Dividends I can add in the same manner.
The beauty of this is that having this additional entry now makes my AI entries match what's on the screen from my brokerage account to the penny! So, instead of seeing only part of the picture (the running AIM programs) I now get to see the full picture. This gives me a place to "park" the cash and leave adding dollars to existing AIM programs for only when AIM gives a BUY order. Further, once the amount in this gets large enough I can use it to start additional AIM programs.
Please let me know if you have any more questions.
Best,
AIMster
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