Still working my way through the book. What I plan to do when I've finished it is backtest it on a few stocks I might have bought if I had been in the system for a year or two.
Two things he hasn't mentioned yet, and I'm wondering if they get discussed in the book or get overlooked are 1) trading costs (which, while cheap, are still not free) and, more important, 2) capital gains taxes. Is this talked about in the book, and taken into account?
A speaker at an NAIC workshop the other day claimed that in order to justify a switch from Stock A to Stock B, you had to project that Stock B would do 40% better than Stock A. I haven't done the math, but I sure plan to! One thing AIM seems to do, if I read it right and if it works as planned, is leave you with significant capital gains which are all, or mostly, short term. For me, that's the aspect which many "take the money and run" advocates overlook -- that when you take the money, you only get to keep part of it. (That's also the factor which those wonderful looking Mutual Fund charts totally ignore -- they show these great upward rising lines based on reinvesting all dividends, but carefully DON'T deduct the capital gains taxes you will have to pay on the income they report to you each year.
I certainly don't advocate holding a stock purely for tax reasons (or selling it for the same reason), but equally you have to look not at how much money you purportedly made during a year, but how much you go to KEEP at the end of the year!
Does "How to..." address this in chapters I haven't gotten to yet?? |
