Hi CH, I'd say that VLSI is the exception rather than the rule. Out of the 20+ AIM accounts of my own, my average is 4-6 trades a year. VLSI obviously raises that average quite a bit!
There's a couple of ways to measure AIM's effectiveness. One is to assume that either Mr. Buynhold or AIM are investing only in an IRA. Then taxes become a null point. Only commissions are then a consideration. To be fare to AIM, it is important to realize that the average yield on stocks is less than 2%. If we assume AIM is 50% invested and the cash is yielding 4%, then overall AIM is getting at least its fare share. Usually the interest will easily offset the cost of commissions in today's world of discount brokers.
If we assume that AIM and Mr. Buynhold are both investing in a personal, taxable account, then we have to pay Uncle for his efforts. Yes, if we assume that Mr. Buynhold has the guts to ride out any form of weather as the market churns about without ever selling anything, then AIM comes out on the short end. However, if Mr. Buynhold actually trades out of one position and replaces it with another periodically, then suddenly AIM doesn't look so bad.
Certainly AIM VS Short Term Trading is more tax efficient. So let's assume that AIM is somewhere in between Mr. Buynhold and Mr. Short Term Trader. Mr. Buynhold is either kidding himself (pretending he never trades) or he's a museum keeper. He either does trade or he doesn't. Mr. Short Term Trader already admits that he's going to roll over his account frequently and that Uncle is his partner. His business is more like a truck depot. No work is done on inventory, just load one truck and unload another. Inventory turns are fast and furious.
Hope this helps to place AIM where it belongs. It's not as extreme as either of the other methods. If one accounts for the tax cost, then it becomes just a cost of doing business. If one forgets to account for taxes, then we have a faulty business plan. AIM's price range between buying and selling is large enough that it should always cover all taxes, commissions and leave the majority of the profits to the user.
Best regards, Tom |
