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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 (15496)	4/3/2001 5:07:53 PM
From: aptus	Read Replies (2) \| Respond to of 18928

Hello Tom, My point is not whether someone should use the "averaging down" method or use the "take his lumps and start a new portfolio" method, but it's that two people starting from the same position and both starting to use AIM should not be doing things differently based on the fact one of them lost money prior to starting his AIM portfolio. If Duke invested $10,000 in ABC last year and his investment is now worth $2,000 and I come along today and buy $2,000 worth of ABC, both Duke and I are in exactly the same position (tax considerations aside) -- irregardless of Duke's $8,000 loss. If we now decide to start AIMing ABC at the same time, why would Duke use the averaging down method while I use AIM BTB? We should BOTH be using the method that will grow our $2,000 the fastest for a predetermined level of risk. After all, I would like to get to $10,000 just as quickly as Duke would. Let's say I was a new AIMer and posted the following message to this board: "Hi, I'm a new AIM user and yesterday I just purchased $2,000 worth of ABC. I have another $2,000 in cash that I can invest in ABC. How should I set up my new AIM portfolio?" I think most people would respond by telling me to create a new AIM portfolio containing ABC, deposit my $2,000 in cash and set my portfolio control to 2000. Then I'd be told to update at a predetermined interval and follow AIM's recommendations. Now what happens when Duke says that he invested $10,000 in ABC last year, today it's worth $2,000 and he'd like to start AIMing ABC? All of a sudden, there's a vast difference of opinion. Some say he should average down, others say he should take his losses and start AIM with the value of his holdings as at today. But he's in exactly the same situation as I am. Nobody would think of telling me to look at the price of ABC one year ago and adjust my portfolio control to that level. Maybe that's really what I should do. Maybe it isn't. The point is that Duke and I are starting at the same place and trying to arrive at the same destination using the most efficient path possible. So the advice we both receive should be (all things being equal) the same -- regardless of our past history. It's like you and I arriving in Las Vegas for the AIM 2001 conference. Now suppose we both decide to go to Bermuda directly from Las Vegas. We would both be looking for the "best" (i.e. cheapest, fastest, etc.) route to get there from Vegas. Just because I came from Vancouver and you came from your home town doesn't mean that we should take different routes. In essence, we're starting from the same place and we're trying to arrive at the same destination using the best possible route. How we got to Vegas really doesn't matter. That fact is, we're both starting from Vegas. I know you and Bernie were talking about specific deep diver strategies, but I was bringing up something slightly different. I won't even try bringing up my view on deep diver rescue operations until we're in Vegas (that is if anyone wants to continue the discussion there). Anyway, I think I've beat my point to death, so I'll refrain from posting anything else on this topic. BTW... I've been receiving email, here at the Automatic Investor factory, telling me that people have been enjoying the discussion on this topic because they are in a situation where they're looking to convert an existing portfolio for use with Automatic Investor. So now I believe everyone out there has enough information from both points of view to make their own informed decisions. regards, mark.