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

To: John Langston who wrote (4949)	7/2/1998 9:08:00 AM
From: OldAIMGuy	Respond to of 18928

Hi John, With AIM, there's a certain critical mass that should be reached with each investment. If you divide up your money into too small an investment in each stock, then AIM tends to want rather large price moves to make a trade. I've had better success with stocks kept in individual AIM accounts. However, if you pool stocks, then do so by industry category. Then they tend to move together. You don't want one up, one down and the net to AIM as "0". The way I handle lower volatility issues is to put an artificial cap on the Cash Reserve. A stock with a BETA of 1.0 would justify no more than 33% cash reserve under most market circumstances. Different folks handle AIM differently when the Cash Reserve gets too big. Jeff Weber syphons off the excess cash and starts new investments. I trick AIM and don't sell. That technique is called a "vealie." So, yes you can trade low volatility stocks with AIM, but there you will have to compensate for the lowered volatility. Besides capping the Cash Reserve or moving it to another new account, you should also experiment with splitting the SAFE value into two parts - a Buy and Sell SAFE. Then you can adjust each separately. Maybe with a low BETA growth stock, you will want something like +8 SAFE for selling and +2% for buying. The exercise is worth the added understanding of just how AIM reacts to the market. One more thing, the last 7 years have been rather atypical. It might also be constructive to model the years 1987 thru 1991 as more typical. I've not measured a full blown low risk period in the market since the fall of 1990; that's an incredibly long time without a big market dip. Sector rotation is part of the reason, but still the bears have been hibernating a very long time. That makes recent studies (especially with AIM) a bit tainted. Please let me know if I can help, Tom

To: John Langston who wrote (4949)	7/3/1998 7:09:00 PM
From: Bruce A. Bowman	Respond to of 18928

Hi John- Instead of just blasting away at the keyboard as usual, I decided to read ahead first and I see that Tom has done his usual masterful job of briefing you on AIM. I'll offer my own first year personal experience to help fill in some texture. I came to AIM during one of my sabbaticals from trading. Instead of dumping everything first as I usually did when I stopped thinking "trade, trade, trade...", I inexplicably held 3 or 4 stocks. About that same time I replaced my computer and when I got the thing running, I went surfing around the P MONEY TALK boards to see what I could find. I spotted a note from Bill Riedeman on the AIM thread, scanned a few notes and got a quick impression, then moved on. A short while later I suddenly had an over night double on 2 of my holdings. I knew I didn't want to sell everything and really hadn't a clue how to handle the success. Then I had a flashback of the AIM thread and went back to read more thoroughly. Tom and I exchanged a few notes, I read Mr. L's book (after ripping off the cover, but that's another story) plus everything I could find on AIM on the net (which isn't a whole lot except what's here or on the old P thread), I got a copy of Bill Riedeman's spreadsheet and I bought Newport s/w. I started out wrong with Newport, trying to use it as an accounting tool. Tom tried to keep me out of trouble, but I didn't understand enough of the AIM concept and didn't see how his recommendation related. However, things did work out OK and a little at a time I switched every holding to AIM. I had a great year in '97 thanks to luck (for having the right stocks) and AIM (for managing trades in spite of me trying to give away the bank). By July I had a double overall in my portfolio; that erroded to a 60% gain for the year (12/31/96 - 12/31/97) as I did a lot of buying on retracements. I don't mean to imply that everyone should expect that sort of return from AIM because it just isn't going to happen that way. It was an incredibly fortunate set of circumstances that allowed me these gains. However, with the benefit of this winning position, I've been able to stick with AIM and watch it work. I understand a lot better today what it is and how it works. Thanks to a year of using AIM profitably and reading + re-reading Tom's info (the FAQ on his website and the additional AIM thread here on SI), I've come to realize that Tom has created a tremendously sophisticated trading tool based upon AIM. He seems to have a variation for all occasions. Some of them are subtle ad some are brute force and all of them work to improve profits. It's hard to imagine a value method not working better if AIM is introduced into the picture, especially if the issue is volatile. Once you get the spreadsheet working you can load up some data and see for yourself. Let us know if there's anything we can do to help you understand AIM better. Bruce