Posted on October 28, 2014 | 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 10/28/2014

Posted on October 28, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why East West Bancorp (EWBC) 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

Airlines Soar in a Bounce-Back Week

Posted on October 24, 2014 | Stock Superstars Report

Airline stocks and industrials were among the big winners for this week as the indexes recovered from the negative volatility of last week.

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Week Almost Completely Filled With Gains

Posted on October 24, 2014 | Dividend Investing

The DI portfolio came pretty close to having all 24 stocks post gains this week.

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The SEC Says “No!” to Next-Generation ETFs

Posted on October 23, 2014 | Investor Update


The exchange-traded fund (ETF) industry was dealt a setback this week. Two applications for next-generation actively managed ETFs were rejected by the Securities and Exchange Commission (SEC). Both applications (one of which iShares owner BlackRock was involved with) were for several ETFs that would have been actively managed but followed the less transparent mutual fund disclosure rules.

Had the SEC given its blessing, several new investment options in the ETF space would likely have been introduced. These ETFs would have provided direct competition to actively managed mutual funds. Presumably, such funds would have given you and me access to active management at a lower cost.

Instead, the SEC adamantly rejected the applications. The agency called the structure of the proposed ETFs “inherently flawed.” Ouch.

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Volatility Making AAII Members More Likely to Buy

Posted on October 23, 2014 | AAII Survey

This week’s special question asked AAII members how the recent volatility has influenced their willingness to buy stocks. About 44% of respondents said they are either looking to buy, are more willing to buy or have bought. Another 19% said they are anticipating a bigger drop, looking for confirmation of a bottom or are sitting on the sidelines. Roughly 9% said the volatility hasn’t altered their willingness to buy stocks, with many of these respondents saying that they follow long-term strategies. Less than 4% of respondents said they have sold stocks in response to the volatility.

Here is a sampling of the responses:

  • “I have bought some stocks and may buy more.”
  • “I purchased a stock on my ‘shopping list’ because blood appeared on the street.”
  • “Accelerated my efforts to find quality stocks to purchase now that they are ‘on sale.’”
  • “I am waiting for better prices on the stocks I have been monitoring.”
  • “Waiting for the official correction to buy more stocks.”
  • “I wish I had more cash to buy stocks.”

AAII Sentiment Survey: Bullish Sentiment Surges to 49.7%

Posted on October 23, 2014 | AAII Survey

The proportion of individual investors expressing optimism about the short-term direction of the stock market surged to 49.7% in the latest AAII Sentiment Survey. At the same time, pessimism plunged.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped by 7.0 percentage points to 49.7%. This is the highest level of optimism registered by our survey since August 28, 2014 (51.9%). It is also the 10th week out of the past 11 with optimism above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 4.2 percentage points to 27.8%. Even with the increase, neutral sentiment is below its historical average of 30.5% for the fourth week in the past five.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell by 11.2 percentage points to 22.5%. The large drop puts pessimism at its lowest level since August 28, 2014.

As the results to this week’s special question show, many individual investors viewed the recent downward volatility as a buying opportunity. The pullback in the S&P 500 and the correction in the Russell 2000 made valuations more attractive and helped to alleviate concerns about stock prices having moved too far upward too fast. Also contributing to the level of optimism are earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Keeping other AAII members cautious are worries that a larger drop in stock prices is forthcoming, a sense that prevailing valuations are still too high, geopolitical events, the pace of economic growth and Washington politics.

Bullish sentiment has risen by a cumulative 14.3 points over the past three weeks. At current levels, optimism is at an unusually high level (more than one standard deviation above average). Past readings of unusually high optimism have typically been followed by lower-than-average levels of market gains, as I explained in the June 2014 AAII Journal.

This week’s AAII Sentiment Survey results:

  • Bullish: 49.7%, up 7.0 percentage points
  • Neutral: 27.8%, up 4.2 percentage points
  • Bearish: 22.5%, down 11.2 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: http://www.aaii.com/sentimentsurvey.


Posted on October 23, 2014 | Model Portfolios

There are two changes to the Model Fund Portfolio. As of October 1, 2014, we removed FMI Common Stock (FMIMX) from the Model Fund Portfolio. Underperformance compared to its high fees was the primary driver to sell, along with the risk associated with the fund operating as a closed fund.

We are replacing FMIMX with First Trust US IPO (FPX). First Trust US IPO is an exchange-traded fund that tracks an index of larger U.S. initial public offerings. It modifies the capital weighting so that very large capitalized companies do not dominate.

If you are following the Model Fund Portfolio, then all existing holdings, including the new holding, should be equally weighted (nine if you own the closed fund CHTTX, or eight if you don’t). You can accomplish this easily by selling FMI Common Stock fund and putting the proceeds into the First Trust US IPO fund.

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Christine Benz’s checklist for rolling over your 401(k)

Posted on October 22, 2014 | AAII Journal

If you are changing jobs or are close to retirement, you will be considering what to do with your 401(k) plan assets. Even if you ultimately decide to leave your investments in your former employer’s plan, you should investigate your options to ensure you are making the best choice. Morningstar’s Christine Benz created a checklist of steps to take.

Check your account value: Account balances above $5,000 open the door to many options, including leaving it with your former employer (if the plan allows you to do so) or rolling it into an IRA or your new employer’s 401(k). If your account balance is below $5,000, your former employer can legally remove you from its plan. Balances below $1,000 can be cashed out.

Determine whether you want to stay within the 401(k) confines: This decision will be partially determined by your former and/or current plans’ guidelines. If you are allowed to do so, you will need to weigh the pros and cons. Employer retirement plans offer some protections and can give you access to fund options not available outside the 401(k) structure. Alternatively, moving your account outside of the 401(k) structure gives you more choices.

When making this decision, compare the costs and fund selection of the 401(k) plan(s) against the options available to you through an individual brokerage or mutual fund account. If you like the 401(k) structure and have the option of either staying with your former employer’s plan or moving it to your new employer’s plan, you will need to compare and contrast the two. Also, look at your options for rolling over to an IRA account, which can be held at the brokerage firm or mutual fund company of your choosing.

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Sell OF THE WEEK 10/22/2014

Posted on October 22, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Netflix (NFLX) 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

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