Hi Keith, Thanks for preparing that report. In an attempt
to carry it a bit further, I've done a bit of math this AM
as well. My intent is to see how much cash reserve would
have been "adequate" for that time frame. I've made a few
assumptions -
1) we started with 1000 shares at $13.48
2) we had just sold some shares at that price
3) Sell SAFE was 8%, Buy SAFE was 0.0%
therefore
4) our Portfolio Control was 8% less than the current value
or 12404
5) the price dropped uniformly for the time period and we
only bought once per month
August
Price/share Shares Portfolio Control
$12.25 1000 12404
= 12250 Stock Value
152 AIM Purchase
------------------------------------------------
September
$11.03 1012.41 Sh 12478 PC
= 11167 Stock Value
1311 AIM Purchase
------------------------------------------------
October
$9.81 1131.27 Sh 13134 PC
= 11098 Stock Value
2036 AIM Purchase
------------------------------------------------
New Total Shares Owned = 1338.81 (33.8% more)
Total cost of new shares = $3499 (ave cost = $10.33)
Starting stock value = $13,480
New Portfolio Control = 14152 (the heart of your risk envelope)
So, if we take the cash needed as being the only cash
available, we would have had:
$13,480 Equity Value (79.4%)
3,499 Cash Reserve (20.6%)
$16,979 Total Value (100.0%)
You would have needed $20.6% Cash Reserve on July 31st to
have had enough to buy all the way to the bottom. I would
assume that for comfort reasons, you would have wanted a
bit more as "contingency."
AIM would have done well selling in the "recovery" period
as well as the "reasonable profit" time. You would have
started selling shares ($100 worth) at $11.57 on the way
back up in price.
Also the Idiot Wave was quite low for mutual funds during
the Oct, Nov, Dec. period of 1998, so you might have done a
combination of Sells and 'vealies' during the recovery
period as cash built up.
All in all, with AIM, you would have had more shares and
benefited from what many folks would have considered a
short term disaster of a 27.2% drop in share price.
Your second example would have done even better, but would
have needed more cash to buy to the bottom.
Thanks again,
Tom |
