Hi Greg, Sounds like plenty of opinion with not much study to back it up. As we've all found out over the years, this is true of most opinion.
The example is a bit crude. A 10% decline won't trigger the first $250 purchase, but a $50 purchase - if one is interested in making that small of a trade. It'll take about a 14% decline to actuate a $250 trade as stated in their example. Here's the same example run again in REAL TIME AIM.
Start with $10000. Buy stock for $5000..
Balance: Stock - $5000, Cash - $5000.
(No commission costs need to be deducted unless it's to be deducted from any other system of buying stocks in a comparison)
Stock drops 14% after one month. Buy stock for $250.
Pay $10 commission.
Balance: Stock - $4550, Cash - $4740, Total = $9290
Stock rises 15.6% next month (so we're practically where we started). Stock value is $5260, Cash - $4740 (no interest!), Total = $10,000.
NO SALE JUSTIFIED BY AIM.
Price continues to rise. Stock Value is now $5975.
Sell $252 of stock. Pay $10 commission.
Balance: Stock - $5723, Cash - $4982, Total $10,705 NET.
Bottom line - You gained $705. Your broker $20.
Conclusion - Motley Fool BB replies were poorly informed!
Best regards, Tom |
