Hi Matt, Thanks for stopping in. We've migrated the main portion of the activity to the Investors Hub site:
investorshub.com
There's lots of folks there who will be able to comment besides me. We moved there some time ago and now have over 18,000 posts showing there as well. Notwithstanding, here's the thoughts I have.
1) In Mr. Lichello's book, you'll find Twinvest in Chapter 15. This sounds like it might be more to your needs than is AIM at this time. Since you're in the accumulation phase, it seems it might be better for you to try Twinvest for systematic investing.
Like AIM, Cash is used as an active part of Twinvest. You'll be periodically adding to your positions (say once a month or quarter) both on the equity and cash sides. After a while you'll have a position established with both the ETF and the cash to then roll it over to an AIM account.
2) Using Scottrade will help a lot on the commission side of things. Generally most of the AIM users attempt to keep the commission expense to about 1% +or- of the transaction's value. That would put you at a $700 order per purchase or sale for now. If you budgeted $10,000 a year for savings, that would work out to $833 a month being added. Twinvest would require 75% of that go to the equity side the first month. That puts the amount of the ETF order at $625 with the remaining $208 going to Scott's Money Market Fund. The $7 commission on a $625 investment isn't that bad. At the end of a year's time you'd have approx. $2496 in the MMF and $7504 invested. At that point, if you wanted to start a new component of your portfolio, you'd turn on AIM and then start a new Twinvest account in the new selection.
3) Until you feel you have the necessary liquidity in a non taxed account you should probably postpone your IRA contributions. Once a slush fund is developed for emergencies, then get the IRA going asap.
4) There are ten business sectors represented in the SPDR. You will do better AIMing the individual sectors than the index fund itself. This is because each sector follows its own lead. This last year Technology has done very little while Energy has been soaring. SPY has gone up because of the energy content, but only about 4% or 5% in twelve months. That's not enough to generate much AIM activity. On the other hand, if you owned the individual sectors then they will move independently where you can trade each profitably.
Also, you may not want to own all ten sectors as some might bore you to tears. Try narrowing the ten down to the ones you're most interested in and feel have the best 5-10 year potential. Then establish one at a time over the next 5 years.
It would cost you too much in commissions to establish all of the sectors all at once, but I believe you can do far better in the long run with the sectors rather than the composite index.
5) I have used AIM with individual stocks since 1988 with good success. Much of the success depended upon stock selection while another amount of the success has been contributed by AIM. The ratio varies according to the time and selection.
Index funds are relatively new for me. I started with individual stocks and eventually added a mutual fund or two. After a while I sold the diversified mutual funds and built a portfolio of exchange traded funds representing individual business sectors. So far they've done very well with very much less downside risk. Please see:
aim-users.com
and
aim-users.com
for more information on my study and personal use of ETFs.
6) I think the business sectors would be the first area, next would be to add Small or Mid Cap Value (which aren't represented in the S&P500 very well). After that, something like ILF (Latin America ETF) and maybe EPP could help to round out the portfolio.
Please feel free to stop in either here or at IHub to read along and/or ask questions as they arise.
Best regards, Tom |
