Four Market Traits AAII Members Would Change

Posted on July 3, 2014 | AAII Survey

This week’s AAII Sentiment Survey special question asked AAII members about the one thing they would change about the current market environment if they had a magic wand to do so. Responses were varied, though they primarily fell into one of four categories. The largest number of respondents (18%) said they would alter monetary policy or raise interest rates. This group also includes respondents who want to know how the Federal Reserve intends to end monetary stimulus. The second-largest group (17%) said they would alter Washington politics. These changes include the politicians themselves, regulations or the tax code. About 14% would change the market environment. Some would reduce current valuations, while others said they would end high-frequency trading or dark pools. Changing the pace of economic growth came in fourth, with about 9% of respondents saying they would accelerate it.

Here is a sampling of the responses:

  • “Speaking selfishly, stock prices should come down to earth.”
  • “Get better clarity from the Fed on how they are going to unwind quantitative easing.”
  • “I’d stop the high-frequency trading.”
  • “Continued improvement in real job growth.”
  • “Have the Fed raise interest rates sooner.”

Social Security’s Lump-Sum Payment Option

Posted on July 3, 2014 | Investor Update

The Social Security Administration offers the chance to receive a lump-sum payment of up to six months’ worth of benefits. It’s not a well-known option, but it is available to anyone meeting the basic requirements. There are also caveats to consider.

Retroactive benefits can be claimed by a person who has reached full retirement age (FRA) and is not currently collecting benefits. FRA is currently 66 for those born between 1943 and 1954. It increases in two-month increments for those born between 1955 and 1959. Those born in 1960 or later will not reach full retirement age until they turn 67.

Full retirement age is the year at which a person first becomes eligible for the primary insurance amount. Social Security benefits can be claimed prior to the FRA, but they will be below the primary insurance amount. Conversely, if claiming is postponed, delayed retirement credits increase the benefits until age 70. The increase in benefits is why conventional wisdom calls for delaying the claiming decision until as close as possible to age 70 for those in good health.

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A Short Week for U.S. Markets

Posted on July 3, 2014 | Stock Superstars Report

U.S. markets closed at 12:00 p.m. CST on Thursday in observance of Independence Day. Despite the shortened week, investors pushed the Dow Jones industrial average above the 17,000 threshold for the first time. Following the Dow’s lead, the S&P 500 also hit a record-setting level of 1,982 on Thursday.

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Mergers, One Deletion and the July Monthly Report

Posted on July 3, 2014 | Dividend Investing

The July monthly report, Dial “M” for Merger, is now available. In it, we discuss the five pending mergers DI stocks are involved with…

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Sell OF THE WEEK 7/2/2014

Posted on July 2, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why General Mills, Inc. (GIS) 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

Avoiding Probate Through Account Titling

Posted on July 1, 2014 | AAII Journal

Joint ownership can make transferring assets at death easy, though the three types have implications that must be thought through.

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Fixed-Income Allocations Rebound to a Four-Month High

Posted on July 1, 2014 | AAII Survey

Individual investors’ fixed-income allocations rose to a four-month high last month, according to the June AAII Asset Allocation Survey. Equity allocations rose as well, while cash allocations pulled back.

Stock and stock fund allocations rebounded by 1.7 percentage points to 67.0%. This is the 15th consecutive month and the 17th out of the past 18 months with equity allocations above their historical average of 60%.

Bond and bond fund allocations rose 0.5 percentage points to 16.0%, the largest allocation since February 2014. The increase puts fixed-income allocations at their historical average of 16%.

Cash allocations fell 2.1 percentage points to 17.1%. The decline follows May’s eight-month high for cash allocations. June’s decline puts cash allocations below their historical average of 24% for the 31st consecutive month.

Both equity and bond allocations have been fairly stable during the first six months of the year. Since January 2014, stock and stock fund allocations have fluctuated within a 1.9-percentage-point range, while bond and bond fund allocations have fluctuated within a 1.5-percentage-point range. The lack of a big change in allocations is not surprising given the trend we’ve been seeing in the AAII Sentiment Survey and the decline in bond yields. Neutral sentiment toward the direction of stock prices has been above its historical average of 30.5% for 25 consecutive weeks. Yields on the 10-year Treasury note have been trending downward throughout the year and ended June near a 12-month low. While individual investors are neither signaling optimism nor pessimism about the six-month direction of stock prices, prevailing low yields are not making bonds and cash attractive alternatives.

This month’s special question asked AAII members what they are doing to get portfolio income. More than half (53%) said they are holding dividend-paying stocks. Nearly a quarter (23%) said they are using bonds or bond funds for income purposes. Several of these respondents said they are using bond ladders. Approximately 7% realize income from REITs and a nearly even number are using master limited partnerships (MLPs). A sizeable portion (13%) of respondents said they are not doing anything. Many of these members are either still employed or receive pension income.

June asset allocation survey results:

  • Stocks and Stock Funds: 67.0%, up 1.7 percentage points
  • Bonds and Bond Funds: 16.0%, up 0.5 percentage points
  • Cash: 17.1%, down 2.1 percentage points

June Asset Allocation Survey details:

  • Stock Funds: 32.4%, up 2.2 percentage points
  • Stocks: 34.6%, down 0.5 percentage points
  • Bond Funds: 12.8%, up 1.0 percentage points
  • Bonds: 3.2%, 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:

BUY OF THE WEEK 7/1/2014

Posted on July 1, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Broadcom (BRCM) 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


Posted on June 30, 2014 | Stock Screens

An approach that focuses on both earnings and assets in order to find undervalued stocks of companies that have the capability to earn future income.

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Creating a Contrarian Screen: The 52-Week Low Formula

Posted on June 30, 2014 | Computerized Investing

A discussion of Luke Wiley’s approach to stock-picking and how to build a screen using his five filters.

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