Subject: Re: A mechanical strategy
Mark .... Its a nuanced question ( ie whether it'll beat S&P or not) -- q is in what context and objective.

For B&H - the answer is a resounding NO!
Its a defensive 50:50 Balanced fund with 50% cash allocation during bullish times and a sequential BTD strategy during a bear.

Markets spend 67% ie 2/3rd 1/3rd in Bullish ie uptrend and the other 1/3rd are pullbacks, Bears are RARE!

I think what you need to ask yourself is that would you EVER do a B&H - ie take your entire portfolio/investable corpus and put it in ONE SHOT into the market? If not - knowing nothing would you say do a DCA type approach. Or is it that its TRUE DCA that you are interested in ie you have steady stream of investable funds which obviously comes to you at known intervals - but you dont have access to future.

I think its in the DCA concept this sort of a strategy has some shot.

Please refer to my earlier responses and suggestions and my own test on a Family 529 DVA vs DCA strategy I mentioned. I will say - I didnt initially get the 50:50 constant allocation of this at that time - I only got it when I wrote the math down!

This time I will not go into math - I am also a very visual person - so lets visualize a graph/chart.

NOTE: You have to do final DUE DILIGENCE on a Backtest - because this is some heuristic thing

So in essence if you are Dollar Cost Averaging - and you would like to have a better entry price - then you try to do this BTD thresholding - ie you wait for an opportunity for the market to correct and you pull trigger at your threshold.

The 2 sides of the coin or the issues are
(1) How far can the market run up before it even gives you an entry? As I mentioned based on my tests - if your entry threshold was IIRC 7.6%+ for almost the entire decade of 1950s this strategy sucked - because the market just wouldn't drop enough and it kept on rising!
(2) How do you know that you are not about to get sucker punched by a deep bear staring at your face , post your entry?

Difficult conundrums both. Hence I used the time-tested wisdom gained from this board to use a BCC variant as a switcher.
(a) So the threshold's tested were <10% while BCC bullish ( my own tweaks as suited for this strategy - not BCC AT LARGE) - so you are basically entering with the prior that its a Correction not a Bear
(b) If the BCC went bearish you exited and waited for it return to bullish
(c) Since you accumulate funds monthly - you will have a cash buildup and stored cash to deploy
(d) You deployed ALL AVAILABLE CASH on entry signals

So in essence the only additional LAYER I see from AIM is its scale in/out rules - whether they add value or not I really cant say without data/analysis.
Because the criticism and FLAW in the strategy is its Defensive posture to bear avoidance - which I think primarily motivates the rules - ie it wants to survive a bear thru the scale in and maintaining the 50% cash side - so the blow is halved.

This is in essence a Blind Man's Bear Catcher - all BCC tests if you are here on this board show that although they marginally under-perform B&H - they cut MDD by half.

So the ONLY Q you have to ask yourself - is - Do I want to be doing Catch the Knives and scale in while BCCs are bearish? Visually if you consider the Bear as a V .... its simply your average of entry points ie basis to the point in the upward V when BCC becomes bullish. If your basis is lower - you WILL HAVE BEAT BCC!

But that's why you need the backtest. Remember on the bullish side BCC is B&H - so anything else you try to do - you will be lowering returns - Yes you can have lower VOL - but you will give up CAGR