Investors Weigh In on Past Allocation Mistakes

Posted on April 1, 2015 | AAII Survey

Last month’s Asset Allocation Survey special question asked AAII members about the biggest mistake they have made over the six-year course of the current bull market. We received a wide range of responses. Nearly 15% of respondents said that they did not hold a large enough allocation to stocks, and an additional 5% said they waited too long to buy stocks or boost their allocations. More than 8% said that they held onto too much cash. Allocating too much to bonds and bond funds was the mistake cited by 7% of respondents. About 15% said that they either invested in the wrong industry or sector (e.g. energy, gold mining, etc.) or failed to invest in the best-performing industries (e.g., biotech, health care).

Slightly more than 11% of respondents said they did not make any allocation mistakes. Many of these AAII members said they stuck to their long-term allocation strategies throughout the current bull market.

Equity Allocations Match 2007 Levels

Posted on April 1, 2015 | AAII Survey

Individual investors’ allocations to stocks and stock funds are now at levels last seen in June 2007, according to the March AAII Asset Allocation Survey. Bond and bond fund allocations rose slightly, while cash allocations declined.

Stock and stock fund allocations rose 0.3 percentage points to 68.6%, matching June 2007’s equity allocation. Stock and stock fund allocations have now been at or above their historical average of 60% for 24 consecutive months, and for 26 out of the past 27 months.

Bond and bond fund allocations increased by a nominal 0.1 percentage points to 16.5%. March was the 10th consecutive month with fixed-income allocations at or above their historical average of 16%.

Cash allocations fell 0.4 percentage points to 14.9%. March was the 40th consecutive month with cash allocations below their historical average of 24%.

Equity allocations are now at their third-highest level in the past 10 years. Only April 2006 (70.3%) and February 2007 (68.7%) had larger allocations. Larger equity allocations have been registered by our survey prior to 2006, with a record 77.0% allocation to stocks and stock funds occurring in January and March of 2000.

A combination of longer-term approaches to portfolio management and a lack of good alternatives may have contributed to the rise in equity allocations. From a return standpoint, the equity markets pulled back last month. Sentiment about the short-term direction of stock prices among our members largely stayed below average last month as well. Yields on the benchmark 10-year Treasury note fluctuated throughout March, ultimately ending down slightly.

March AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 68.6%, up 0.3 percentage points
  • Bonds and Bond Funds: 16.5%, down 0.1 percentage points
  • Cash: 14.9%, down 0.4 percentage points

March AAII Asset Allocation details:

  • Stocks: 32.8%, down 1.1 percentage points
  • Stock Funds: 35.8%, up 1.4 percentage points
  • Bonds: 3.9%, up 0.7 percentage points
  • Bond Funds: 12.6%, down 0.5 percentage points

Historical Averages:

  • Stocks/Stock Funds: 60%
  • Bonds/Bond Funds: 16%
  • Cash: 24%

*The numbers are rounded and may not add up to 100%.

The AAII Asset Allocation Survey has been conducted monthly since November 1987 and asks AAII members what percentage of their portfolios are allocated to stocks, stock funds, bonds, bond funds and cash. The survey and its results are available online at:

Sell OF THE WEEK 4/1/2015

Posted on April 1, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Apollo Education Group (APOL) 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


Posted on March 31, 2015 | Weekly Features


This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.

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BUY OF THE WEEK 3/31/2015

Posted on March 31, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why National Oilwell Varco (NOV) is his “Buy 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: Buy of the week

Greater 401(k) Focus on Retirement, But Not Annuities

Posted on March 27, 2015 | AAII Journal

About 93% of employers are very likely or likely to “create or broaden focus on financial well-being of employees beyond retirement” this year, according to an Aon Hewitt survey. Yet the focus for many employers will not extend to including annuities or other similar lifetime income products as investment options in defined-contribution [e.g., 401(k)] plans.

Aon Hewitt says seven Americans are reaching age 65 every minute. Given this, it is not surprising that nearly three-quarters of plan sponsors will experience an increase in retirement-eligible employees over the next three years. In response, 52% of employers say they are very likely and 38% say they are likely to offer retirement planning to near-retirees. Slightly more than half (51%) are very likely and 38% are likely to increase communication about the retirement process. Online modeling tools and mobile apps designed to help employees determine how much they will be able to spend in retirement may be made available by 53% of employers (“moderately likely action”), with 17% seeming more certain about providing them (“very likely action”).

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A Quiet but Eventful Week

Posted on March 27, 2015 | Stock Superstars Report

This week was a quiet one in the markets, which is not that unusual given that we are nearing the end of a calendar quarter. In fact, two of the lowest-volume days of 2015 occurred this week. The markets are in wait-and-see mode now that the Federal Reserve has removed the word “patient” from its guidance about when it may alter monetary policy.

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A Bright Spot This Week: Record Dividends

Posted on March 27, 2015 | Dividend Investing

Markets took a turn for the worse this week (narrowly escaping a five-day decline), but how much of it is due to news versus noise? We are currently heading into a quiet time period: The end of the quarter is near, and the next Fed meeting won’t be held until late April. In time periods such as these, we see that even fairly insignificant news items can move the market. On top of skittish investors, this week marked one of the lowest-liquidity weeks of the year.

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Achieving Greater Long-Term Wealth Through Index Funds

Posted on March 26, 2015 | AAII Journal

John Bogle (JB): Let’s start off with the obvious. Imagine a circle representing 100% of the U.S. stock market, with each stock in there by its market weight. Then take out 30% of that circle. Those stocks are owned by people who index directly through index funds. The remaining 70% are owned by people who index collectively. By definition, they own the exact same portfolio as the indexers do in aggregate, so they will capture the same gross return as the direct indexers. But by trading back and forth, trying to beat one another, they will inevitably lose by the amount of their transaction costs, the amount of the advisory fees they pay, and the amount of all those mutual fund management costs they incur: marketing costs, processing, technology investments, everything. When we look at the big picture of the costs of investing, including sales loads as well as expense ratios and cash drag, it is a foregone conclusion that active investors, in aggregate, will under perform index investors. It’s the mathematics.

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Responses to Fed Language Change Very Mixed

Posted on March 26, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what they thought about the Federal Open Market Committee removing the “patient” language from its recent meeting statement. Responses were very mixed. The largest group of respondents, 25%, agreed with or otherwise approved of the message. Several of thought the Fed was purposely trying to avoid surprising market participants or was being conscious of the impact that an unexpected change in monetary policy would have on the markets. Slightly less than 24% of all respondents said the change in wording was not significant. About 10% disapproved of the meeting statement and/or current monetary policy. Roughly 9% thought interest rates should be raised. An additional 9% said a rate hike is forthcoming, while 6% said they were expecting the wording change in last week’s meeting statement.

Here is a sampling of the responses:

  • “All of this parsing of words tells me that [the Fed] is doing a good job and not trying to stampede the crowd in either direction.”
  • “I think it is about time that they raise interest rates. The economy has been doing well enough to have interest rates raised.”
  • “Big mistake. The so-called recovery is very fragile.”
  • “Gobbledygook. Fedspeak is right up there with doublespeak.”
  • “Simply one step closer to raising the interest rate.”

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