Hi Bernie, As AIM users, we're already doing much better than the average person who attempts to hit and miss the timing of the market. Buy And Hold is really the only other method of long term investment that usually holds a candle to AIM.
As AMD proved most vigorously over the years, Buy And Hold has some shortcomings also. AMD was once in my portfolio. I'd owned it sometime around 1990, I believe - maybe earlier. Their litigation problems with INTC always bothered me. That's when I sold their stock and bought into VLSI. Each stock was a roller coaster ride. Each would have driven Buy And Hold to nervous fits. Each benefited from AIM's supervision.
We as AIM users forget how easily it makes money for us. While the rest of the world sweats out short term trades, we sit back and know that every sale will generate a LIFO gain that's substantial. If we're not trading, it means that our stocks haven't reached the point where we're meeting our business plan's objectives for profit. It's not the fault of the method, but of the market or the stock.
I look at the "frequency" of trading issue in a different light. First, I want to know that I'm meeting ALL my business objectives relative to profitability. There's no use being in business if we're not doing that.
Next, as part of my business plan, I know that I must have Cash Reserve available when needed. By design, AIM can run out of Cash, but can never run out of Shares. So, I feel that when recovering from a severe downturn in the market, it's nice to let AIM sell frequently to rebuild Cash quickly. Don't sell more than AIM wants, just make sure we sell all that AIM wants.
Because of my conservative nature and AIM's conservancy of Equity, I'm more inclined to hesitate during the Buying part of AIM's cycle than during the Selling. AIM is usually an efficient purchasing agent for us, but we don't need all the inventory all at once. This is why Mr. Lichello warned us about AIM wanting to "pump the brakes" during rapid price declines. He didn't want us to calculate the next Buy price and immediately place the order. He mentions that if the price says down until the next time we calculate, then it's okay to add more shares - even at the same price. I agree, I don't think he expected us to do it 15 minutes after the last trade.
If AIM has a limited resource, it is its Cash Reserve, not its equity. As AIM warehouse managers it's our S&L division that can run dry. By AIM mechanics, we can't run out of equity.
When I looked back at my GENE history with AIM in recent times it impressed me once again how wonderfully it works. Even as my GENE account doubled in value, the dollars at risk didn't really increase at all. It's only been in the last short time frame that the risk amount has risen. The reason for that isn't AIM's, but my own manipulations. I've now started to let the risk rise via 'vealies' as my Cash Reserve is, for now, fully funded at over 50%.
I fully agree with you that frequency of AIM trading doesn't always improve yield. In most cases it just creates more taxable events and work at tax time! The reason I switched to GTC Limit Orders from market orders was for ease and simplicity. It eliminated one more concern from the investing equation. I know the orders are within the guidelines of my business plan and that's first on my agenda.
I do remember when I used to run AIM on 13 column paper. There was always a sense of anticipation as the numbers unfolded. There was also the sense of joy at watching the portfolio grow. None of that has changed since I started using AIM on the computer. I still look forward to entering the prices each week and seeing what AIM will suggest.
I think a large part of the reason that we collect such a good group of people here at this thread is that so many of us are consistently making money! Hard to get angry when we're all in the black!! It's the results that count. Like owners of the same franchise restaurants, we're all doing well and our business plan is standard. However, each of our restaurants is in a different neighborhood and needs its own personal touch to make it work for us. It's nice to know that the business plan works in such varied ways.
I imagine this topic will be debated in Las Vegas. I'm sorry you won't be there with us for that discussion. I'd have liked to have heard a presentation showing the difference in total return over time with various frequencies of trading. I'd hoped you'd do that presentation. Maybe it can be done here on the BB, or if you would like, I'd present it for you in Las Vegas. Let me know what you think.
Best regards,
Tom |
