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

To: B. J. Barron who wrote (7973)	7/16/1999 12:53:00 PM
From: OldAIMGuy	Respond to of 18928

Hi BJ, With Mutual Funds, I've been using 8% to 10% SAFE for the SELL SAFE while keeping the Buy SAFE at 0.0%. I have nine years of experience with this model in my IRA, with the most recent 4 years using "vealies" to control the size of the cash reserve. With Individual Stocks, I've primarily used 10% SAFE for both the Buy and Sell sides. On REALLY VOLATILE stocks I've increased this to as much as 15% on both sides. If starting a stock account that's quite small in size or very conservative or low in volatility, then reduce the SAFE evenly on both the buy and sell sides to get the trade range into shape. I use "vealies" when my cash reserve for stocks or funds is fully funded according to the Idiot Wave. However, you could use an arbitrary value based upon the largest historical price drop for that equity. When the cash reserve percentage has dropped to 10% less than the IW is suggesting, I resume AIM's selling. This will quickly bring it back to the IW's value. Generally I treat diversified mutual funds and individual stocks as different classes of equity. I give the more conservative diversified funds less total cash and also let them buy as aggressively as I can with the reduced SAFE value. Individual stocks have to be treated somewhat individually! The "personality" of the stock needs to be taken into account. If we're buying SaraLee, it's one thing, if we're investing in an IPO for DONUTS.COM, it's another! SaraLee might work with less total cash reserve, but we need to look at history to see what the down-side risk has been. In an attempt to increase the amount of equity in a stock or mutual fund portfolio, I'd switched things around to put all the trade resistance on the buy side and use vealies to replace the resistance to selling. It just doesn't have enough merit. It's one of those "There ain't no such thing as a free lunch." things. Best regards, Tom