Okay Bernie, Here's the analysis I asked for:
Starting point $5000 invested, $5000 cash. AIM By the Book. Once a month investing. Portfolio Control at $5000. Share price $10ea. However, when the account is actually started, the stock is at half that value - $5.
Using Mr. L's $10-8-5-4-5-8-10 cycle.
"Break Even" ($10,000) comes in 2.5 months
and occurs when the price is $6.35/share X 1436 shares plus $879 Cash Reserve.
Now, we'll do the same with Portfolio Control set at 2500 instead:
$10,000 total initially. $5000 Invested, $5000 Cash Reserve. At the time of AIM's start, the value is $2500 for the stock, so we'll use 2500 as PC.
"Break Even" (10,000) comes in 4 months
and occurs when the price/share is $9.48 X 389 shares plus $6314 Cash Reserve.
Now how about Four full cycles from $10/share Cost Point?
AIM By The Book:
2610 shares X $10 + $11,065 Cash = $37,165
AIM with "adjusted" Portfolio Control:
975 shares X $10 + $9311 Cash = $19,061
(NOTE: AIM NEVER ran out of cash!)
How about Four full cycles from when AIM was started after the stock had fallen to $5/share?
AIM By The Book:
2057 shares X $5 + $16,713 Cash = $26,998
(NOTE: AIM NEVER ran out of cash!)
AIM with "Adjusted" Portfolio Control:
768 shares X %5 + $11,468 Cash = $15,308
Now, technically you can interpret Mr. Lichello's words the way you want, but which result would you want? I started my accounts exactly the way I'm describing in 1988 except that I had zero cash reserves. I've managed to do okay.
If I'd started your way, I don't think I'd be as big a bragger as I am, because I wouldn't have as much to brag about! I don't think your advice is the best possible advice for someone who's trying to get started with AIM. It's not good fiduciary advice to tell someone to extent their recovery time, take greater losses than necessary and reduce their future potential. Sorry, that's my interpretation of Mr. Lichello's work.
Best regards, Tom |
