Hi $$, Hope AIM can help satisfy your appetite for profits!
If you've done a good job of selecting companies, then you have to look at price drops as buying opportunities. I've used the "farmer" analogy in the past, but maybe once more is a good idea:
Just like farming, there's seasons for investors. Sometimes we're planting and other times we're busy harvesting. Since you have the "luck" of getting to plant before you harvest, just remember to plant the best seeds you can. Remember that not all crops come to maturity at the same time.
Each "season" allows us to harvest profits and store them away in our Cash silo. If we eat everything that's in the silo, then there's nothing left to plant for the next season. So, just like the farmer, we're going to have to keep some seed on hand as long as we can.
As you may have already figured out, AIM is a proportional control device. Small market moves make for little or no change in your equity/cash ratio. Big moves will generate big AIM moves in response. AIM doesn't predict, but reacts. It says, "I don't know if this is the last buy or just the next in a long series. However, I do know that this price is lots better than the last one at which we bought!" Assuming that the fundamentals of your favorite equity haven't deteriorated, then there's no other logical thing to do than buy more and wait for a profit opportunity in the future.
I'm not very popular at cocktail parties when the market is in the dumps. Everyone else has long faces and I'm smiling about the great "bargains" I've been buying. When will I ever learn!!!
Bear markets do come along. I started my investing on the worst one in this half of the century the 1969-1974 period. It'll make you question your sanity!!! I Dollar Cost Averaged into that bear market, all the time scratching my head and wondering HOW THE STOCKS COULD POSSIBLY GO ANY LOWER!!!! Eventually they did start to go up, but the wait was truly painful.
In more recent times, it seems that "bear markets" last a total of about 20 minutes!!! When my kids were little they couldn't stand the wait at a "sit down restaurant", they wanted "fast food." It's a similar thing in investing. I guess we can't expect a gourmet feast from the "pick-up window!" Let your time horizon stretch, AIM will take care of you and let you savor every bite.
As a realistic goal for one's investments, take a look at basic inflation and add 5% to it. Consider anything above that to be pure icing on the cake. If you always beat inflation by 5% (no matter how high it ever gets) then you are always making money.
1987 was the last time I was 100% invested in the market. Even that "crash" only lasted a few months, and was even shorter for AIMers. I wish my prescient vision was as good as my hindsight, but it isn't. That's why AIM has worked so well for me. I've tried to out-guess it, but that's usually backfired.
Remeber, good solid fundamentals, a good "business plan" like AIM and TIME will give you excellent returns. If you have a "gut feeling" that the bad market conditions will last a long time, then you can both pump up the Buy SAFE (Buy Resistance) value and stretch out your buy time frame to conserve cash and make your purchases more efficient.
Mr. Lichello's AIM called for Time Designated Purchases of about once per month. I've chosen to use a Price Designated Purchase plan. However, I try to keep to only one purchase per equity per week. This has kept my "cash burn rate" acceptable for most stocks. There are some holdings in my account that I use longer time frames for even when my price targets have been reached or exceeded. That's a "feel" thing that develops over time. Whether it's made me any extra $$$ or not, I can't say as my accounting isn't that great! I'm just happy to almost always have NO stocks in my portfolio showing a loss. The longer you AIM, the more profitable holdings you will have. Right now I do have some holdings that are in the red. Most are newer AIM accounts. From memory, my Hong Kong fund, gold fund, one tiny biotech and IDTI are in the red. All are relatively recent positions compared to my overall portfolio and all have been hit by extreme bear market conditions in their own sectors.
VLSI, on the other hand, is still showing a profit of about 80% even though the stock has fallen to only 1/3 of its previous high!!! However, I've owned that stock since 1990. Now 80% isn't much of a return for almost 9 year of effort, but the stock IS near its lows for the ENTIRE period. Even a modest recovery will make this holding a shining star again.
In general, bear markets are much shorter than bull phases. If your stocks are calling for more AIM buys, then think LONG TERM and make the buys. Chanced are that AIM will save the day as it has with so many of us here!
Best regards, Tom |
