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Non-Tech : AIM: The Money Machine
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To: joe wiles who wrote (21)10/30/1997 8:57:00 AM
From: OldAIMGuy   of 52
 
Hi Joe, Most technical analysis methods are heavy in momentum type thinking. AIM's contrarian by design. It looks at what has just happened in the market and reacts - it doesn't try to predict. It buys from the momentum players that are temporarily dissatisfied and sells shares to those momentum players that are trying to ride the coat-tails of the latest hot ride. You'll not be able to reconcile AIM with momentum thinking unless you can be contrarian.
A stock that doubles is a short term dream. TA and momentum strategies look for signs that this might occur and then ride the wave as long as they can. Let's assume that we've done our fundamental homework and catch the same stock using AIM. By the time the first cycle peak is reached, we've salted away a fat cash reserve. As the momentum players bail out and the price plunges, we have time to look at our fundamentals again and decide if we are still right about the long term aspects of the company's future. If it still looks good, we plow the excess cash back into the same stock and are all set for the next "wave" of momentum players. Why be satisfied with a 2X gain when you can participate in a 10X or 20X gain over several years?
Try a good book on market psychology as a start to understanding why AIM is perfect for the market as it is today. David Dreman's book "Psychology and the Stock Market" (1977) is a great start.
A favorite quote of mine is from another long term investor's book. It says "The reason people don't make more money in the stock market is that they don't set their goals high enough!" If you are hunting for "ten-baggers", you have to have patience and a plan of risk management to maximize your gains. AIM provides both.
Best regards,
Tom
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