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

To: OldAIMGuy who wrote (15443)	3/30/2001 8:17:47 PM
From: LemonHead	Read Replies (2) \| Respond to of 18928

Hi All, LemonHead doesn't like being behind the Eight Ball!!! So I got a couple of New Books to further my education or eradication in this market. What Wall Street Doesn't Want You To Know How you can build Real Wealth Investing in Index Funds Larry E. Swedroe 01/2001 Timing the Stock Market When to Buy, Sell, and Sell Short Colin Alexander 1999 Has anyone on the BB read either of these works? If you can AIM with Calls & Puts, is there a possible method for Shorts? I intend to be objective, but I want to improve if at all possible (AIM). Keith@Fishing&Reading.org

To: OldAIMGuy who wrote (15443)	3/31/2001 2:43:08 AM
From: aptus	Read Replies (3) \| Respond to of 18928

Hello Tom, I hadn't read your Q&A page for some time, thanks for the reminder links. The information on that page is well worth revisiting every so often and should be required reading for anyone starting out with AIM. After reading your note, I was struck by an idea that brings together what you are saying and what Bernie is saying. So here it is... The reason I lean towards Bernie's method is because I view money lost in a non-AIM managed portfolio as money without a history. Therefore the original investment value is only a psychological anchor that people tend to hold onto (i.e. I put $10,000 into my investment account, it's now worth $2,000, so I've got to get back to $10,000 in order to break even). But the goal of investing is to make money. So even if I started off with $2,000 today (i.e. I didn't lose $8,000 of my original $10,000 investment a year ago), I should still try as hard as possible to get to $10,000 (or whatever value I choose). As an example, let's say we have two investors: A and B. Investor A started with $10,000 last year (in a non-AIM account) and lost $8,000. His portfolio is now worth $2,000 today. Investor B starts with $2,000 today. They both decide to use AIM starting today. From a strictly logical perspective, they are in exactly the same situation (i.e. they both are starting new AIM accounts with $2,000) -- I'm excluding tax considerations in this example. Now if investor A decides that he needs to get back to his original $10,000 in the quickest way possible, he might decide to average down by adding another, say, $2,000 and buying additional shares at today's price (as instructed by AIM). Or he might decide to follow the Bernie way. But notice that A is not trying to do anything different from what B is trying to do. B should also be trying to get to $10,000 as quickly as possible. Therefore if A is doing the right thing, B should also be doing the same thing (i.e. whether by following the Bernie way or pretending he purchased shares one year ago for $10,000, pretending he lost $8,000, adding another $2,000 to his portfolio and purchasing more AIM recommended shares). In essence, both A and B are in identical situations and should be following the same strategy (all things being equal). The only difference is from a psychological viewpoint (i.e. A lost $8,000 while B hasn't lost anything). But that psychological perspective really doesn't have anything to do with the reality of A and B's investments. And it's that psychological anchor that can be dangerous if investors don't know exactly what they're doing. I've seen studies that show that because people hate to lose money, they'll take on more risk in an effort to make back their losses without even realizing it. I still like the Bernie way, but there are certainly situations where your suggestion is superior. The point is, however, that whichever way is superior, investors should be following it -- regardless of whether they've incurred previous losses or not. regards, mark.