Hi Dave, Interesting figures. It totals about a 16% better for Buy & Hold over AIM. Here's where I usually "rationalize" by calculating what I term "RETURN ON CAPITAL AT RISK" (RCR). If you calculated the return on the average capital a risk for the period, it would look better.
For the nine stocks, total return for Mr. Buynhold is about 90%. Total return for AIM is 64%. However, Mr. Buynhold was 100% at risk at all times while AIM was quite a bit less.
Mr. Buynhold invested $90,000 and it grew to $170,945.
Mr. AIMvestor invested $67,500, held $22,500 out of the market and the total grew to 147,465.
If we assume an average of 25% Cash Reserve for the entire period, it would push the RCR to about 85% - not that far off Mr. Buynhold.
It is a matter of the cost of one's portfolio insurance. If we never had to worry about losing money, no insurance would be needed. AIM's risk management does have a cost in the early years. With enough cycles, usually AIM will catch Buy & Hold and then continue on in the lead.
It looks like only ASND ran out of cash during the recent trauma. In the last two years you may not have had a chance to have done "vealies" on these stocks if you started at 25% Cash Reserve. Of course a bigger starting cash reserve would have meant that much bigger anchor to carry along the way.
Thanks for taking the time to run the comparisons. It's interesting that only one of the nine stocks was at a loss during the period (of course AIM didn't have ANY losses!:-)). That's good stock picking all by itself! I'm actually surprised for this period that AIM did as well as it did. Considering the market since 1990 there's almost no strategy that beat Buy & Hold.
Best regards, Tom |
