Q........
Dear Tom
I have been saving and investing for many years now, and am ready to retire,
and would like to draw income money from my investments (mutual funds)
say...6-8% per year.
Read everything on AIM I could find, but nobody talks about this subject,
have you run across these questions before?
Is there a way to adjust AIM to drawing retirement money instead of just
long term investing?
Ed
A............
Hi Ed,
I guess we all enjoy either bragging or complaining more than discussing an income stream from AIM!! In fact, many on the BB are retired, so we have individually addressed this subject - each in our own way.
In my own account I own growth stocks and funds and also Long Term Bond Funds. The growth side of my portfolio is there to beat or meet inflation in the long run while my bond funds are the income producers. I also use the interest income from the money market funds as part of our income stream. Almost all of my "Cash Reserve" is in money market funds. However, for my mutual funds, I have about 1/3 to 1/2 of it assigned to a very short term bond fund. There it earns just a bit more than the money market funds and is still reasonably liquid.
My Long Term Bond Funds are managed with AIM, but there I use only a 10%-12% Cash Reserve. When bonds and bond funds are out of favor (usually interest rates rising) I use the small amount of cash to add to the bond fund position. Then when bonds are again in favor (usually interest rates falling) I'll sell off a small portion of the fund for a capital gain. That way, I take the income stream and an occasional capital gain to sweeten the total return. Right now my main holding in bonds is a closed end mutual fund called ACM Government Security Fund, traded on the NYSE under symbol GSF. It pays about 9+% right now.
The Long Term Bond Funds give us our base income stream. We can pay all bills, cover our basic cost of living with the yield. This is our "tight belt" income. Not much left over for frills. So, when the market is depressed and my Cash Reserve is low (after AIM has had me buying lots of cheap shares) our income is temporarily at that "tight belt" point. Then, as the market recovers, AIM and I refund the cash reserve and our monthly income starts to rise.
Using AIM with mutual funds (growth oriented) really gives you a "growth and income" type fund. As the fund grows, AIM sidelines the profits in the cash reserve giving you income! You will find that AIM does better with pure growth funds than with a growth and income fund. The reason is that the G&I fund is attempting to do some of what AIM is doing. There's a conflict of activity. My brother's advise was always to "buy growth funds for growth and income funds for income." He wasn't much of a fan of the dual purpose funds. With AIM, this is even more true.
For your situation, you will have to see just what ratio of high yield bond funds, cash reserve and growth stock mutuals will give you the base income that fits your "tight belt" cash flows. Set up the long term bonds to produce that basic level. (LT bond funds are "fairly" priced right now - about in the middle of their long term low and high points) I'd keep about 10% cash reserved for them for bargain shopping some time in the future when Mr. Greenspan is raising interest rates.
What's left over after you have satisfied the "tight belt" income requirements is what you can apply to a good growth stock fund. There's a list of good funds that should work well with AIM at our AIM Users web site.
execpc.com Here you have a choice of using AIM to build your auxiliary income source (by letting the cash reserve build over time) or attempting to keep the cash reserve limited by use of "vealies" as the fund grows. Either method will eventually build your income stream. That income stream will float a bit with interest rates, but if AIM and the mutual fund do their job, your income should grow over time and most likely grow faster than inflation.
I hope this helps you with your thinking on AIM and retirement. The latest version of Mr. Lichello's book (revised in 1992) addresses some of this in the last chapters of the book. Please let me know if I can help at all as you get started.
Best regards, Tom |
