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

To: JZGalt who wrote (7585)	6/1/1999 10:28:00 AM
From: OldAIMGuy	Respond to of 18928

Hi Dave, Your points are very well stated. Market cycles happen much slower than we want them to, sometimes! Also, the best way to prosper as an investor in the long run is to understand the long term aspects of the companies in which we invest. The main thing I attempt to do with the existing investments of mine is to re-qualify them frequently. I have my basic ideas of what it is that I want from a "new" investment, and I look for those same qualifications in my existing ones. If it appears that the long term prospects are starting to flatten out as a company, industry or product matures, then I'll consider ending one investment and starting a new one. Quarterly results and upsets are really not part of my analysis. In fact, those things are what make the stocks interesting AIM holdings! As companies grow larger, they seem to get better at smoothing out their quarterly reporting and making more consistent returns. This doesn't mean they are no longer good investments, but may mean they are ready to shift to a different level of the "investment pyramid." If AIM's been doing its job, then we usually have accumulated a reasonable number of shares by the time we shift them to the "foundation" layer of the pyramid. That's when long strings of "vealies" really help out. We can get away with lower total cash reserves for these more conservative investments and vealies help us to more closely approximate the Buy&Hold investor's results during long bull phases. When there are market setbacks, we still have enough buying power to add substantially to our overall holdings. Yes, your are right, the "vealie" was designed to make small incremental increases in our risk envelope (Portfolio Control) as the market value rises, not when it is declining. It's an attempt to keep us more fully invested over long rises in the market rather than declines. AIM's buying will take us to a greater investment threshold, and at appropriate levels of discount, just as a good purchasing agent should. Then, as an equally good inventory control manager, AIM will part out shares as soon as the last in are nicely profitable. I find myself sometimes trying to evaluate my stocks from a "time-value" point of view. Are they "keeping up with the Jones?" Not all stocks move synchronously, so this complicates the analysis. (especially since the advent of "sector rotation") There's also the long term potential VS the tax consequences of selling out now to find a faster horse. These are not easy things about which to decide. Nor are there any hard, fast rules about it. After all, we're then peering into the crystal ball. AIM's beauty is in being "reactive" rather than "predictive" in nature. Because AIM's based upon hindsight, we need to be very good at fundamental analysis so as to feel secure about letting AIM work its best efforts. If we don't feel that the company in which we're investing and AIMing has good survival and prosperity aspects, then we can't feel good about averaging down. It's great to cull the thousands of stocks in the market for fast movers and high BETAs, but we should also understand WHY these stocks act the way they do. Upon closer examination, there may be reasons that stand in the way of prudent investing - even when managed with AIM. It must be the anesthetic wearing off!! I haven't been this wordy in a long time!! Maybe I should quick bring up my Word Processor and get a couple of quick chapters done on that book I promise to someday finish!! My good friend, Carl, returned the Thomas Phelps book (100 TO 1 IN THE STOCK MARKET) the other day and I've been skimming through it again. What a nicely written book that is! For any that would like a good investment reading, take the effort to locate a copy and indulge yourself. Best regards, Tom