Good morning Dan and Welcome,
Here's a couple of things that might help:
1) there's a larger and more active group of AIM users here - investorshub.advfn.com
2) Look for posts by JoeForkeyBolo as he's been doing a massive amount of testing of leveraged funds and ETFs with AIM. His results have helped him fine tune AIM for such investing.
3) I have experience with 1.5x leveraged business sector funds and it proved to be pretty good at keeping AIM working. It wasn't as manic/depressive as the 2x and 3x funds, but was better at capturing some smaller market moves that non-leveraged funds missed.
4) Cash may be a "Four Letter Word" but not the bad kind. Here's something I wrote earlier this year on the subject:
Ladies and Gentlemen,
I was talking with a friend recently and we were discussing whether CASH is an Anglo-Saxon Four Letter Word! During 2024 it seems that sidelining cash was missing an opportunity. However, that's only if we consider Cash's value vs turning it into risk.
I suggested that for any portfolio, cash can be an inexpensive insurance policy. While not a magic bullet, it does offer some cushioning during short term downturns. If nasty bear markets come along it offers its true value as portfolio insurance. It can be used to build out a portfolio during the times that markets offer better value.
We buy cars and houses and don't think twice about having insurance on those items. It's just a cost added to the ownership. Does Car Insurance prevent us from getting into accidents? Does home insurance prevent flooding, fire or other damage to the structure? As I said, insurance isn't a magic bullet. It's only there to help recover from unexpected damages.
During much of the first two decades of the New Millennium truly cash had very little value when sitting on the side. Except for occasions like 2000, 2003, 2008-09, 2011, 2015, 2018, and 2022 it didn't do us much good! During those years Cash did an admirable job of building out our various portfolio strategies. However, with the joys of Inflation came better yield on cash. Now the cash segment of our portfolios is at least pulling some of its own weight. It's earning at better than 2x the average yield on stocks right now. So, holding a portfolio of high priced stocks/funds is yielding dividends less than cash's yield. I guess we can ask at those times, "How much would our total portfolio go down without the cash buffer?" I noted that since the end of November, my Signal 10 U.S. Business Sector ETF portfolio has dropped 4.64% including its cash reserve. Without the cash, it dropped 5.59% on the "invested" side. So, the cash has provided its first benefit - acting as a buffer. Cash even went up in value ever so slightly with interest and dividends accumulation.
Should the ETFs continue to lose value, eventually our program will shift into Purchasing Mode. It takes between 15% and 20% decline from a previous share inventory reduction (incremental sales) before the program gets interested in spending any cash. Once that has happened, the second benefit of holding cash becomes apparent. Now it can rebuild share inventories in a proportional fashion as prices decline. That can continue as long as the cash holds out.
Where mutual funds and individual investors tend to hold the least amount of cash at or near market tops (see Norman Fosback's writings along with AAII) they also hold the greatest amount of cash at or near market lows. Our M.O. has that inverted. We tend to hold the greatest percentage in cash nearer market tops and, on occasion, run cash to zero near market lows. In the recent 2022-2023 decline the Signal 10 Sector ETF portfolio drew down the cash by roughly half while buying up lots of shares. My smile would have been greater had the decline been larger and the drawdown complete to zero cash. Still, those new shares provided extra profit for the portfolio during 2024. Here's how that portfolio looks as of the end of December:
So, we're again ready should the markets get funky.
I'm glad you've enjoyed my musings on market risk.
Best wishes for the New Year,
Tom
5) The most complete Q&A the AIMers have assembled over the years is here:
investorshub.advfn.com
You should find lots to chew on there. Also, please feel free to ask questions either here or over at i-Hub.
6) Remember that the quality of your AIM management is directly related to the quality of the "inventory" that AIM is managing. I tried high volatility stocks of poor quality and AIM did its best with them. I've found that picking inventory for AIM to manage is better if I look at Total Return and use these goals:
a) Price Appreciation over Time
b) Dividend Capture over Time
c) Profitable Volatility Capture over Time
These are not mutually exclusive goals. "c" can be used with "a" and/or "b" and given enough time will offer good total return. Also note the common element - TIME -as that's what is needed for AIM to work its magic.
I hope this helps you as you move around the Learning Curve of AIM. I still view my portfolio as an "Equity Warehouse" with AIM as the inventory manager. I'm in charge of inventory selection. At 75 years old, I'm a bit more conservative than when I was 35 and just getting started with AIM. My warehouse has lots of different inventory but most of it is in unleveraged ETFs today (managed individually as separate AIM engines). I still keep a "sandbox" of individual company stocks (also managed individually by AIM) for its entertainment value but this speculative portfolio is only 5% of my total Warehouse Assets Under Management.
Best wishes,
OAG Tom |
