The Changes I Made to My Portfolio

Posted on October 31, 2013 | Investor Update

Twice a year, I check my portfolio to see if any rebalancing needs to be done. I look at my allocations at the end of April and at the end of October to coincide with the start of the ‘worst six months’ (May through October) and the start of the ‘best six months’ (November through April). This week, I took the additional step of modifying the funds I hold in my 403(b) plan. (Since AAII is a nonprofit, our retirement plan falls under a different part of the tax code than 401(k) plans do.)

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Defined-Maturity Funds: A Bond Alternative With Compromises

Posted on October 31, 2013 | AAII Journal

These bond funds terminate near preset dates and can be laddered, but have caveats that should be understood.

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AAII Sentiment Survey: Individual Investors Expecting Treats, Not Tricks

Posted on October 31, 2013 | AAII Survey

Worries about evil spirits haunting stocks intensified slightly, even though the percentage of investors expecting Mr. Market to continue handing out treats stayed above 40% in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 4.2 percentage points to 45.0%. This was the fourth consecutive week that the percentage of AAII members who said “I ain’t afraid of no market ghost” stayed above 40%. The historical average is 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, edged up 0.3 percentage points to 33.6%. This is the second consecutive week that expectations for conditions to neither turn brighter nor more ghoulish were above the historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 3.9 percentage points to 21.5%. Even with the increase, fear of ghastly market conditions returning remains below the historical average of 30.5% for the third consecutive week and the sixth time in the past eight weeks.

Given the previous two-week 16-percentage-point decline in pessimism, seeing a small rebound this week is not surprising. More importantly, it does not suggest a greater fear of something going bump in the night. This said, concerns about slow economic growth, elevated stock valuations and the lack of a long-term fiscal solution have not gone away, and some individual investors do fret that something is lurking in the woods. Nonetheless, rising stock prices, better-than-forecast third-quarter earnings and economic growth are keeping a larger number of individual investors hopeful that the witching hour will not return in the foreseeable future.

This week’s special question asked AAII members what type of candy they plan on giving trick-or-treaters tonight. A long list was given, with assorted chocolate bars (a mixture of Milky Way, 3 Musketeers, Snickers, Baby Ruth, etc.) being the most common candy of choice (21% of respondents). Among those giving out a specific type of candy, the top choices were Snickers (12%), Kit Kat (5%) and M&M’s (5%). One group of lucky kids will be getting Ghirardelli chocolate squares tonight. About 28% of respondents said they won’t be giving out candy tonight. Many of them said a lack of children in their residential area was the reason why.

This week’s AAII Sentiment Survey results

  • Bullish: 45.0%, down 4.2 percentage points
  • Neutral: 33.6%, up 0.3 percentage points
  • Bearish: 21.5%, up 3.9 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at:

Upcoming Chapter Meeting: AAII St. Louis

Posted on October 31, 2013 | Local Chapters

Date: Thursday, November 7, 2013
Topic: Profit From a Rapidly Changing World in 2014
Speaker: Robert Hsu, President, Absolute Return Capital Advisors LLC

Saddled with aging population and heavy entitlements, Europe sinks into recession as socialist leaders take control in France and the U.K. Here in America, a demographic crisis is also brewing, as 70 million baby boomers gradually enter retirement age in the coming years. As growth slows, much of the world counted on emerging markets such as China and India to be the growth engines for the global economy, but both economies are also slowing down. In a zero-interest-rate environment, how can investors generate enough returns to retire? International money manager Robert Hsu will share with you his strategies that earned solid-double-digit average annual returns by profiting from major global trends that will continue in 2014.

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Upcoming Chapter Meeting: AAII Boston

Posted on October 31, 2013 | Local Chapters

Date: Thursday, November 7, 2013
Topic: Dividend-Paying Stocks: The Winner’s Game
Speaker: Roger S. Conrad, Co-Founder and Chief Editor, Capitalist Times

As the Federal Reserve gets ready to wind down quantitative easing, conventional wisdom says that all things income-related are headed for trouble, particularly dividend-paying stocks. Ironically, for decades it’s been shown that returns on these stocks follow the growth of the underlying companies that pay the dividends, just like other stocks. The key to making money isn’t to try to forecast interest rates, but to keep tabs on businesses’ health. Conrad draws on 30 years of experience highlighting the best of the dividend-paying stock sectors, from utilities and energy stocks to telecoms and Canadian real estate investment trusts.

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Upcoming Chapter Meeting: AAII Birmingham

Posted on October 31, 2013 | Local Chapters

Date: Thursday, November 7, 2013
Topic: Lessons Learned from Harvard and Yale Endowments: Using Managed Futures for Portfolio Diversification
Speaker: David Johnson, President and Portfolio Manager, Global Capital Group

Numerous studies show that adding diversified, non-correlated alternative investments to portfolios has not only increased returns beyond traditional portfolios but has done so with significantly less risk. David Johnson will show mounting evidence of a coming tough environment for traditional investments over the next decade and how to select portfolio components that have the potential to increase returns and reduce risk in this environment. Stocks, bonds, managed futures, and real estate all have their places in a robust portfolio for the next decade. The key is learning what each has to offer and how to use them together effectively in this challenging investing environment.

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Posted on October 30, 2013 | Computerized Investing

TakeStock 2 is a software program that allows users to monitor and evaluate their actions in the market.

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Social Security Basics

Posted on October 30, 2013 | AAII Journal

In this first article of a new three-part series, the impact of a worker’s retirement age on Social Security benefits is explained.

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Sell OF THE WEEK 10/30/2013

Posted on October 30, 2013 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Altera (ALTR) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week

Upcoming Chapter Meeting: AAII New York City

Posted on October 30, 2013 | Local Chapters

Date: Wednesday, November 6, 2013
Topic: The New Way to Play Emerging Markets

Speaker: Reshma Kapadia, Staff Writer, Barron’s Magazine

Reshma Kapadia argues that the next wave in investing in emerging markets is the abandonment of the well known MSCI Emerging Market Index. The BRIC nations, which make up 43% of this index, have faltered since 2009. Further, the large companies that dominate the index are often state-owned and export-dependent on the U.S. The MSCI Frontier Markets Index (which includes such countries as Kenya, Vietnam and the Philippines) is up 9% over the year compared with its far better known big brother, which is down 2%.The most rewarding investment opportunities in these frontier countries relate to consumer-oriented sectors and dividend-paying equities in these frontier countries, and Kapadia explains how to take advantage of these tempting opportunities.

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