Please Jack, Be careful of that yellow snow!
The folks at The Money Show seemed to be in agreement that 0.5% was going to be the next move.
When AIM gets in the Buying Mode, this is when it's probably hardest for AIMers to maintain control. By staging out our purchases with adequate time intervals, we usually become more efficient buyers. Don't encourage the Purchasing Dept. to do all its buying at once. There just might be better prices available later.
Using only minimum sized orders staged once per week, bi-weekly or monthly will go a long way to keeping your cash working efficiently. The frequency of buying is a matter of 'personality' of the equity in question. And there's always that 'Dead Critter Bounce' that seems to come along. We see a dip in price that trips our GTC minimum order but goes down further - briefly. Then the stock seems to want to recover as other "buy on dip" investors come bargain hunting. Sure enough after that bit of support the stock then goes back into a slide. This is why we don't chase stock "Up."
I own a Mexican construction/contracting company's stock - ICA. I bought twice in 1999. I also sold six times. Those two buys were staged out over about three months. That's just the way this stock is. No use buying too soon. I just added an additional 26% to the position today at $2-7/8. Last buy was at $3-1/4 and the one before that $3-7/8. Those three buys have taken place over five months. Not exactly day trading!!
Current yield on ICA is about 8.5%, so even if the risk of dividend failure is higher, I'm being paid more than money market rates while I wait for the stock to rebound. Last year's high was $7-3/4, so there's some room for profit if we get that far. In 1997 it traded as high as $19+ (my best sell price was $19-1/2). I started this AIM account with 2000 shares at $4-7/8 in 1995 and NO cash reserve. It built its own reserve over the next 4 months to be 42% of the position. Not bad! The price at that time was $11. I only had 700 shares left by 1997's $19+ high.
ICA is one of the only holdings I have showing a current loss. I've owned it since 1995. If the price rises about $3-1/2, I'll be "break-even." It was there in December, so it's a real possibility that it will go there again.
My point is that we don't need to blow the whole Cash Reserve in the first price dip. We should, as good purchasing agents, try to out-wait those wanting us to buy their equities. Just as good sales people understand their 'art', so must good purchasing agents.
In my pre-AIM days, I was good at parting out shares just like AIM does. However, my biggest mistake was in rebuilding the inventory too quickly. I used to do dumb things like double my position with a 15% drop in price from a previous high. This worked in quickie corrections, but usually left me wishing for more cash as my small and mid cap stocks continued down to 30% to 50% discounts.
Before taking up investing full time, I sold capital equipment to the metals industry. I was not bad as a salesman. I knew the Purchasing end of the business only as as salesman, however. Mr. Lichello's AIM has always been better at purchasing than I was on my own. It's the single biggest reason that I adopted AIM as my business model.
Best regards, Tom |
