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

To: Jack Park who wrote (9285)	11/19/1999 1:18:00 PM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

HELLO Jack!, In different market times indexes can move in unusual ways. The very heavy weighting of the top couple of NASDAQ stocks has made it very hard to beat the NASDAQ Composite Index in the last two years. While the majority of the 5100 stocks making up the NC index did nothing or actually declined, a few very large cap. stocks drove the NCI to record after record. It would have been nearly impossible to beat the NCI during the last couple of years unless you owned just the top 5 or 10 capitalized stocks of the index. Even then AIM would have had trouble given the ballistic nature of the index. The NASDAQ 100 has out performed the NCI for some time because of this. On the Short Term, our AIM Return On Capital At Risk (Deployed) can many times beat the indexes. It usually takes several cycles for AIM to beat the indexes on a Total Return basis. AIM is an insurance plan and there's always costs to pay for insurance. Given time and different market conditions AIMing the index should beat both buy and hold and eventually the index as well. My IRA with Ultra beat the NASDAQ index for many years on a total return basis. However, since I was new to mutual funds having never owned one or managed it with AIM, I let the Cash Reserve build to a much larger level than I would today ('vealies'). That slowed the growth of my portfolio as it rose to over 50% Cash Reserve and stayed there for a very long time. If I'd been using 'vealies' all along, I might still be ahead of the NASDAQ Comp. but I'd have to test it to find out. The NASDAQ has moved so powerfully in the last couple of years and so narrowly that I don't know if my mutual fund would have been up to the task. We have broad market moves and narrow ones. I'm not sure we can always be ahead of the indexes at all times. I do think it's important to set personal portfolio goals and then see if we can consistently reach those goals. To match or beat the indexes would most easily be accomplished with an index fund managed with AIM. Given enough market cycles it should be feasible. Time's the important feature here, however. To calculate my Return on Capital At Risk with AIM I sum and average the Equity percentage of the portfolio for each period of the history. If we come up with 70% average invested for the time involved, then I divide the total return by 0.70 to achieve the ROCAR value. Since the current Bull market started, according to some historians, in 1982 it has been very difficult to get AIM to do as well as Mr. Buynhold. There's been very few buying opportunities along the way. Some trace this market's roots to the 1974 bottom (I'm one of those). Again, AIM would have struggled to keep up. However, if we take a look at the market peak of 1969 and carry it forward to 1999, I think AIM's had a fair chance to keep up. A good test would be that thirty year time frame for the S&P500 Index. I'd suggest it be tested on a monthly basis for the sake of the testor's sanity. Even so, there would be only ONE SIGNIFICANT BEAR MARKET in all that time! The rest were just moments of indigestion by comparison! I ran the Value Line Composite Index for the period of '69 to '89 and AIM beat Buynhold by about 50% in that time frame. Unfortunately my old Lotus (DOS) spreadsheet runs out of capacity at about that much data! Such a test would make a great presentation for our AIM conference. After all, AIM is a long term management concept, so the test periods should also be long term to see its potential. One would have to use 50% as a Cash Reserve maximum and use 'vealies' to control it. Maybe it could be lowered to even 33%. It all depends upon how quickly and for how long AIM would have run out of cash in the demise of the 1969 BULL. Best regards, Tom

To: Jack Park who wrote (9285)	11/19/1999 1:21:00 PM
From: Jack Jagernauth	Read Replies (1) \| Respond to of 18928

Hi JP, folks, notice we don't use Hi Jack. I was thinking the same and, if you hadn't mentioned it, I would have :-) I find the numbers you have derived very interesting. Let me see if I understand your trial. If TSE300 is a particular exchange and you "traded" it, then your results would be the equivalent of trading a mutual fund with the same stocks. Yes? Yes, that's correct, it's very much like trading a low MER index fund with no commissions for buying/selling/switching. One could do very well just AIMing the Nasdaq, which is what some here are doing with Profunds, etc. Your idea of a contest sounds interesting. Apart from getting the AIM settings right, I feel that in order to beat a particular index, one has to make judgement calls about a few things, such as when to enter, and when to exit. Other approaches might be to take more money off the table than indicated by IW (Idiot Wave), or to AIM bear funds when the risk is extremely high. I feel that with AIM and good judgement, one could beat an index. Sincerely, Jack