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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: OldAIMGuy who wrote (15460)3/31/2001 4:17:29 PM
From: Bernie Goldberg  Read Replies (1) of 18928
 
Hi Tom,
I thought one of the purposes of the cash reserve was to prevent an investor from jumping in with both feet allowing one to have some Cash in Reserve just in case the stock's price continued to decline.(or started to decline)
Once one accepts your premise of starting an AIM account with a very low or nonexistent Cash Reserve it becomes a modus operandi. If we look at a stock that has fallen significantly we can then start an AIM program with no cash.
look at Cisco. Going all the way from 82.50 to 20 something surely that would be a good candidate for starting with no cash reserve. We know that now it is at 18. There are many on Wall St. who think it could hit 10 or less. If we bought into the low or no cash reserve theory and started with an insufficient cash reserve at 20, what would we do at 16? Probably regret not having started with a cash reserve. Assume the pundits right. What about 12 or 10? The only way you can know for sure is with the wisdom of hindsight.
I never suggested rolling over and saying the market licked me. I made two suggestions based upon Duke's situation. His question referred to how to start with a position that was already down. One suggestion was to add cash. The other suggestion was to sell some shares to raise cash as Mr. Lichello suggests in his book. My method does not guarantee low performance, rather it guarantees a measure of safety.
Best regards,
Bernie
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