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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Larry Grzemkowski who wrote (7929)	7/11/1999 4:13:00 PM
From: JZGalt	Read Replies (1) \| Respond to of 18928

Larry, Check this out. <grin> geocities.com ---- Dave

To: Larry Grzemkowski who wrote (7929)	7/12/1999 8:36:00 AM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi Larry, I think that tinkering with the Portfolio Control inside of AIM has to be done in a thoughtfully planned way. I'm not certain that I want to yet let the computer decide when I want to raise my risk envelope!! It's a great idea for simulations to let the Cash Reserve be capped at a certain percentage of the portfolio value, but I'm not sure it's a great idea to have it happen in our actual running portfolios. Maybe Bill can tell you how to go into the background of PCA and make those advances to Portfolio Control along the way to help you determine what's a proper setting. I'd suggest that you look first at what the maximum NAV decrease has been in those Strong family of funds (Milwaukee, WI based, btw) during a bad market period. I'd suggest that you look at the 1998, 1990 and 1987 summer highs VS the same years' lows. We want to have enough cash reserve on hand at high risk market times to be able to continue to buy all the way to the bottom of a cycle. So, armed with the information from the above "bear" markets, plug in ever smaller Cash Reserve levels with a simulated drop in NAV over several months. Don't forget that AIM likes to "pump the brakes" in a decline. So let the PCA simulation keep the price the same for two periods at each price level during the decline. That way you'll see just how far the price can drop before all the cash is gone. With Strong's conservative funds you may find that you only need a maximum of 20% or 25% cash reserve. If that's the case, restart your PCA simulations with less total cash reserve. This should improve the results when compared to Mr. Buynhold. It also should give you a rational "target" for your own maximum cash reserves in your retirement account. I have a couple of conservative stocks (one being Sealed Air Corp. - SEE) that I only use 20% maximum Cash Reserve. Over my history with the stock (since about 1990) it's only used up all that cash ONCE. So, why should I carry heavier armor into battle than I need? The values I present in the Idiot Wave are for high BETA stocks and funds and not for the more conservative equities out there. It's not a precise science to select the proper cash reserve for each equity out there, but by seeing how AIM's buying behavior would have worked for a company or fund in past declining markets, we can get a good feel for what's appropriate for the future. Hope this helps, Tom