Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: LemonHead who wrote (10385)	3/5/2000 9:22:00 AM
From: OldAIMGuy	Read Replies (2) \| Respond to of 18928

Hi Keith, Thanks for preparing that report. In an attempt to carry it a bit further, I've done a bit of math this AM as well. My intent is to see how much cash reserve would have been "adequate" for that time frame. I've made a few assumptions - 1) we started with 1000 shares at $13.48 2) we had just sold some shares at that price 3) Sell SAFE was 8%, Buy SAFE was 0.0% therefore 4) our Portfolio Control was 8% less than the current value or 12404 5) the price dropped uniformly for the time period and we only bought once per month August Price/share Shares Portfolio Control $12.25 1000 12404 = 12250 Stock Value 152 AIM Purchase ------------------------------------------------ September $11.03 1012.41 Sh 12478 PC = 11167 Stock Value 1311 AIM Purchase ------------------------------------------------ October $9.81 1131.27 Sh 13134 PC = 11098 Stock Value 2036 AIM Purchase ------------------------------------------------ New Total Shares Owned = 1338.81 (33.8% more) Total cost of new shares = $3499 (ave cost = $10.33) Starting stock value = $13,480 New Portfolio Control = 14152 (the heart of your risk envelope) So, if we take the cash needed as being the only cash available, we would have had: $13,480 Equity Value (79.4%) 3,499 Cash Reserve (20.6%) $16,979 Total Value (100.0%) You would have needed $20.6% Cash Reserve on July 31st to have had enough to buy all the way to the bottom. I would assume that for comfort reasons, you would have wanted a bit more as "contingency." AIM would have done well selling in the "recovery" period as well as the "reasonable profit" time. You would have started selling shares ($100 worth) at $11.57 on the way back up in price. Also the Idiot Wave was quite low for mutual funds during the Oct, Nov, Dec. period of 1998, so you might have done a combination of Sells and 'vealies' during the recovery period as cash built up. All in all, with AIM, you would have had more shares and benefited from what many folks would have considered a short term disaster of a 27.2% drop in share price. Your second example would have done even better, but would have needed more cash to buy to the bottom. Thanks again, Tom