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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 (5644)	9/15/1998 2:20:00 AM
From: AltLar	Read Replies (1) \| Respond to of 18928

To: Tom Veale From: Larry Crawford Sunday, Sep 13 1998 1:08PM ET Hello Tom, I've read Lochello's book and have an eval copy of Newport. I like the AIM concept and would like to start using it. However, I don't know how to start. Would you mind giving me some advice? I have invested heavily in the oil drillers and service sector. Like most in this sector the value of my portfolio has been devestated (though last week was very encouraging). I don't want to sell here at what I hope to be the bottom for this sector. (I hold a significant percentage on margin). Is there a sensible way I can start using AIM, given my situation? Your thoughts would be greatly appreciated. Thanks, Larry Tom's Response... To: Larry Crawford (who wrote...) From: Tom Veale Monday, Sep 14 1998 9:40AM ET Hi Larry, AIM would ba a very sensible way for you to work your way out of the margin accounts. If you averaged down to get your accounts established, start your AIM account with the average cost per share of the accumulated issues. Since they are all in one sector, you can trade them in one AIM account as a "sector fund." For use with Newport, combine the value of all the shares purchased and give the account an arbitrary 2000 shares. To do this take the total cost of all the shares and divide by 2000. That price will be your "NAV" just like a mutual fund. Enter the 2000 shares with the NAV per share. If you want the account to be totally realistic, start with a Cash Reserve value equal to the Margin position you are now carrying (A Negative Cash Reserve). Each week you will total up the value of the various shares and divide by 2000 and enter that value in Newport. When AIM tells you to sell $1000 of stock, you choose which stock you want to sell and pick the appropriate number of shares to equal about $1000. AIM's not real fussy, so if you sell a bit too much or too little, don't worry. AIM will take care of it next time around. Let's assume that the NAV of you portfolio is $15 at the time AIM tells you to sell $1000 worth of the shares. After you make the trade, you find that you actually sold $1200 worth. 1200/15=80 shares. So report to Newport that you sold 80 shares of the fund at $15. Newport will take care of the rest. If you have substantial positions in several stocks, then you may want to just run each stock as a separate AIM account. Then each is its own leader. This eliminates you having to act as "fund manager" and select which stock to sell out of a combined AIM account. AIM will make profitable trades (LIFO basis) as you reduce your margin exposure. Eventually, you should establish a large enough cash reserve that margin won't be necessary again. However, it will require you to MAKE THE TRADES that it suggests! If you balk at selling shares, reducing your margin acct and building a cash reserve, don't be surprised when AIM asks you to buy and there's no purchasing power left in your account. AIM lets you surrender Market Timing and concentrate on more fundamental aspects of your stock selections. If you want to repost your question and my answer on either the regular AIM bb or the In Depth Questions bb, please feel free to do so. It's amazing how many people get into similar situations and will benefit from it. Best regards, Tom