History behind this strategy

Because AIM is such an interesting and imagination-provoking system, I've decided to jot down thoughts I've had about my experience with my particular accounts and modifications that have come to mind. This first part will be some history behind my experience with AIM and many of the thoughts that I've had in the past (although not all, since many of them I've forgotten).
I first read the book How to Make $1,000,000 in the Stock Market in the 80's. I can't remember the exact year, but I remember it taking my imagination by storm. For anyone reading this, if you want to more understand what I am talking about, I would suggest you read it as well. I was convinced it was the perfect system for a long-term investing strategy. I longed to put it to the test with my own money. I always went by the Richest Man In Babylon strategy and put away 10% of what I made. Eventually, I had a tidy sum to invest. For some reason, I always went into an investing account with the intention of staying strictly with the AIM strategy, but then got impatient and would break the commitment in some way, always losing a bunch of money.
Fast forward to this year (2008). I noticed that the market was quite a ways down from it's highs of October of last year and got this great idea to take the $5000 that was left in my IRA and invest in the 5 small Dogs of the Dow with half of it. The prices seemed historically low to me. I would not assume that I could just imagine there was cash in the other half, as I had mistakenly in the past. This time there actually was. I was going to use the system as it was originally suggested by the author (so I intended.)
Shortly after I did the initial investment, everything took a pretty big surge upward. I was encouraged, to say the least. Then we saw the beginning of a large sinking through the rest of the summer. Ignoring the book and thinking it would be a short-lived drop in prices, I decided to make purchases of appropriate stock whenever it got to the point where it called for it in the spreadsheet (and I watched it every day), instead of doing one adjustment per month, which is the minimum suggestion from the book. I did my best to keep the dollar values of each of the stocks even.
About that time, I found the AIM website, where a guy figured out that in a long-term bull market, the system accumulates too much cash. He made two modifications to the system. One was a Dual Safe feature – one for buying and one for selling. The selling one he left as in the original suggestion, at 10% of the stock value. The buying one he either put to zero or put it to a different percentage. I still think that is a good idea when we approach the upper end of a market. I think a bit of extra investment can be done in a little smaller corrections instead of just the major ones. It could be adjusted depending on whether a purchase has been made or how many within a certain time frame have occurred. That way, it doesn't take a lifetime to get two or three cycles. We'll get into my specific thoughts on that later. The second modification was this: If the percentage of cash got above 50%, if he had a sell signal, the amount to be sold would be put on the Portfolio Control instead of being sold. Of course, I didn't have to think much about this since I knew it would be quite a while before we would be in that situation. I have since, however, had some thoughts on that part of the modification. Again, I'll discuss that later.
What ended up happening is I almost ran out of cash when the market tanked in the fall. After three purchases, I started bringing the Buy Safe up, but it almost broke me anyway. So, I went to the suggested strategy of only modifying once a month, unless a stock fell out of the criteria and had to be replaced. By the way, the criteria for the five stocks in this particular trading strategy, is: The original stocks are the 5 smallest Dogs of the Dow, meaning they are the lowest price that pay the highest dividend. If any of them fall out of the Dow or quit paying a dividend, they are no longer a candidate and are replaced. I don't worry about if they are actually a Dog or not, as long as they are one of the 30. My original stocks were GE, HD, MO, C, and GM. I bought about $500 of each. Since, MO dropped out of the Dow and I replaced it with PFE. Then GM quit paying a dividend – I replaced them with BAC. Then C quit paying a dividend. I replaced them with DD. They quit the dividend the same day I bought a bunch of shares. I didn't find out the dividend was gone until two weeks later, and by that time the stock went up. So, now DD has the highest value of any of the stocks, because of the rise in C, and then the rise in DD immediately after I bought it. And that's where I stand.
12/31/2008
The market has become much less volatile in the last couple weeks. It could be an indication that we're at a bottom. I hope so – I am still very low on cash, although it's starting to come up. I throw $40 in there every month, if I can, and get about $50 or so a quarter from the dividends.
My thought on the modification for the top of the market is that I would wait until the cash percentage got over 60% before I would start not selling when AIM told me to. Also, on the Split Safe, I would only put that into effect when the market is in the upper end (i.e., there are sell signals) and I would keep it until I had one purchase, then move it to 5% for the second purchase, then to 10% if there was a third purchase in a row, just to keep me from ever running out of cash again. I had some thoughts about setting up a model for the Dogs dating back to 1996 - actually I started it. I will post updates as this model progresses, as it takes quite a bit of time to go back and do it. I think it may be as interesting to you as it sounds to me :)