September AAII Asset Allocation Survey: Fixed Income Rises to an 8-Month High

Posted on October 1, 2014 | AAII Survey

Individual investors boosted their fixed-income and cash allocations last month, according to the September AAII Asset Allocation survey. Bond and bond fund allocations are at an eight-month high, while stock and stock fund allocations are at a four-month low.

Stock and stock fund allocations declined 0.6 percentage points to 66.7%. This is the smallest equity weighting since May 2014 (65.3%). Even with the decline, stock and stock fund allocations remained above their historical average of 60% for the 18th consecutive month and the 20th out of the past 21 months.

Bond and bond fund allocations increased 0.2 percentage points to 16.8%. This is the largest allocation to fixed income since January 2014 (17.0%). The historical average is 16%.

Cash allocations rose 0.5 percentage points to 16.5%. Even with the increase, September was the 34th consecutive month with cash allocations below their historical average of 24%.

After falling in the first half of the year, fixed-income allocations rebounded in the third quarter. Bond and bond fund allocations have stayed at or above 16% since yields on the 10-year Treasury started staying largely below 2.6% in early summer. Cash allocations have shown more variance over the past several months, with some of the fluctuations potentially being due to differences in which AAII members took the survey on a given month. Stock allocations have remained above 65% throughout 2014, aided in part by the market’s upward momentum.

The shift in allocations this month is subtle and does not appear to signal a shift in preferences. Many AAII members continue to be frustrated by low bond yields and low interest rates on money market accounts. Plus, optimism about the short-term direction of stock prices remained above average throughout September.

September Asset Allocation Survey results:

  • Stocks and Stock Funds: 66.7%, down 0.6 percentage points
  • Bonds and Bond Funds: 16.8%, up 0.2 percentage points
  • Cash 16.5%, up 0.5 percentage points

September Asset Allocation Survey details:

  • Stocks: 33.9%, up 2.8 percentage points
  • Stock Funds: 32.8%, down 3.3 percentage points
  • Bonds: 4.2%, up 1.1 percentage points
  • Bond Funds: 12.6%, down 1.0 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

Members’ Asset Allocations Remain Mostly Stable

Posted on October 1, 2014 | AAII Survey

September’s Asset Allocation Survey special question asked AAII members how the record highs set by the S&P 500 this year have influenced their allocation decisions. More than half (53%) of respondents said they have not altered their allocations in response. Nearly 20% of respondents said the record highs have either made them more cautious or prompted them to increase their cash allocations. Some of these members said they are favoring more conservative (large-cap, dividend paying) stocks. About 5% said they have increased their equity allocations.

Here is a sampling of the responses:

  • “I always adhere to the same allocation, regardless of market movement.”
  • “It’s made me more cautious of a correction.”
  • “I have started taking profits, and transferred 30% of my portfolio to cash.”
  • “No, I’m normally close to 100% stocks and stock funds.”
  • “I’m very hesitant to invest more heavily in stocks; still waiting for a healthy pullback.”
  • “Staying with the plan from last year; just waiting for the opportune time to rebalance.”


Posted on September 30, 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.

Read more »

BUY OF THE WEEK 9/30/2014

Posted on September 30, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Banco Bradesco S.A. (BBD) 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

Small-Cap Stocks Are Lagging, But We’re Not Intentionally Avoiding Them

Posted on September 26, 2014 | Dividend Investing

Small-cap stocks have been receiving a bit of attention lately for their lackluster performance. As of yesterday’s close, the Russell 2000 index has a year-to-date loss of 3.71%. This is nearly 10 percentage points worse than the Russell 1000 index, which is up 7.64% year-to-date.

The decline has some sparked some debate about the market’s overall momentum. There is a school of thought that large-cap stocks cannot continue to march higher without small-cap stocks also doing well. While we don’t disagree with the concept of a broad-based rally being a good thing, we’ll point out that large-cap and small-cap stocks have not historically always moved in lockstep. The 2014 Ibbotson SBBI Yearbook says small-company stocks have had a 0.79 correlation to large-company stocks since 1926.

Read more »

The Bears are Dancing, Plus Two Changes to the Portfolio

Posted on September 26, 2014 | Stock Superstars Report

The October SSR Monthly Report is now available at the SSR website. There is one new portfolio deletion and one new portfolio addition to announce.

Read more »

How Should PIMCO Fund Shareholders React to the Departure of Bill Gross?

Posted on September 26, 2014 | Investing, Quarterly Mutual Fund Update
Tags: > >

“Bond king” Bill Gross is leaving PIMCO, a company he co-founded, to join Janus Capital Group (JNS). Our mutual fund guide shows Gross as the lead manager on eight PIMCO mutual funds. Our exchange-traded fund (ETF) guide shows Gross as the lead manager on one PIMCO ETF. The Closed-End Fund Association’s website shows Gross managing two close-end funds. It is possible that there are institutional funds that Gross manages as well. A list of funds managed by Gross that are readily available to individual investors is displayed below.

If you own shares in a PIMCO fund managed by Gross, the big question is what should you do now? In situations when a manager leaves, the best move can be to sit tight and monitor the situation. If the fund(s) still meets your criteria for buying it, then don’t make a kneejerk reaction. Rather, see who takes over the fund and how that manager (or group of managers) performs relative to their category peers. Though likely to be less outspoken, the new manager(s) may prove to be as talented as or even more talented than Gross. They could also be worse. Until actual results begin to appear, nobody knows with any certainty how the funds will perform.

I realize that the advice to sit and monitor the situation can seem tough to follow. If you are uncomfortable doing so, go through the data in our fund guides. Look at the long-term performance of comparable funds, paying attention not only to the recent top performers, but also to those funds that have been able to best their peers over several years without experiencing considerably higher levels of volatility in their year-by-year returns. When doing this, be aware that bond market conditions going forward are likely to be different than they have been over the last five or 10 years. Pay attention to manager tenure, since the returns of a past manager don’t tell you how the new manager will perform. Don’t forgot to review the expense ratios as well, since every dollar spent on fees is a dollar you will never see again.

PIMCO Mutual Funds Managed by Bill Gross:

  • PIMCO Fundamental IndexPLUS Absolute Return (PIXDX)
  • PIMCO StocksPLUS Absolute Return (PSTDX)
  • PIMCO Small Cap StocksPLUS Absolute Return (PCKDX)
  • PIMCO StocksPLUS Absolute Return Short Strategy D (PSSDX)
  • PIMCO Low Duration (PLDDX)
  • AMG Managers Total Return Bond (MBDFX)
  • PIMCO Total Return (PTTDX)
  • PIMCO Unconstrained Bond (PUBDX)

PIMCO ETFs Managed by Bill Gross:

  • PIMCO Total Return ETF (BOND)

Closed-End Funds Managed by Bill Gross:

  • PIMCO Corporate & Income Opportunity Fund (PTY)
  • PIMCO High Income Fund (PHK)

How to Invest Like a Quant Fund

Posted on September 25, 2014 | Investor Update


Quant funds utilize computer algorithms to guide their investment strategies. These computerized methods pick securities based on quantitatively identifiable characteristics. Rather than selecting stocks with a good story (e.g., Alibaba (BABA)), they select stocks based on various fundamental or technical criteria.

Many hedge funds follow quantitative strategies. Smart beta funds also follow these strategies. Last week, Morningstar announced that it is now designating quant exchange-traded funds (ETFs) as strategic beta funds. The investment research company described these funds as those that try to improve returns or isolate a specific return relative to a benchmark, increase or decrease the level of risk relative to a benchmark, or follow non-return or risk-oriented strategies, such as equal-weight strategies.

The basic idea behind quant funds is to identify anomalies or return factors that lead to higher returns or less volatility. By giving a preference to investments with these characteristics, higher returns, less volatility or both are sought. It can be an unemotional way to invest as long as personal biases are not allowed to interfere with either the creation or the execution of the model. The better you are able to stick to the model, the more you will be able to invest like a quant fund.

Creating your own model does require a level of comfort with a good screening program such as our Stock Investor Pro and, depending on the model used, a spreadsheet. If you are unwilling or unable to do the mathematical and computer work, following a quantitatively oriented screen or buying a strategic beta fund may be the better option.

Read more »

One Quarter of AAII Members See Improvement in Labor Market

Posted on September 25, 2014 | AAII Survey

This week’s special question asked AAII members for their opinion about the current state of the job market. About 5% described conditions as improving. Slightly more than 24% of members said the labor market is improving, but the pace of growth remains too slow. At the other end of the spectrum, 24% said the job market is still weak.

Common themes among respondents were wages and job skills. Many members thought too many entry-level or lower-skill jobs were being filled and too few higher paying jobs were being created. Several members also discussed skills, either in terms of workers not having enough skills or being overqualified, or in terms of companies not providing adequate training.

Here is a sampling of the responses:

  • “Improving and likely to continue. However, there are a lot of low-paying jobs out there.”
  • “Much of the current unemployment is due to a lack of skills.”
  • “Stagnant, woeful and lacking for all but the most menial jobs.”
  • “Stronger, but wages are too low and there aren’t enough good-paying jobs.”
  • “Many workers are being forced to take jobs below their qualifications.”

AAII Sentiment Survey: Steady Optimism Remains Above Average

Posted on September 25, 2014 | AAII Survey

Optimism among individual investors about the short-term direction of the stock market remained above its long-term average for the seventh consecutive week, according to the latest AAII Sentiment Survey. Although above the long-term average, bullish sentiment fell slightly compared to last week. Neutral sentiment also declined this week, while pessimism rose.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.4 percentage points to 41.8%. This week now ties the seven-week stretch that the bullish sentiment stayed above its historical average of 39% between November 28, 2013, and January 9, 2014. The next record will be surpassing the 14-week stretch between December 29, 2011, and March 29, 2012.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 4.9 percentage points to 29.9%. This puts the neutral sentiment below its historical average of 30.5%, breaking the three-week streak.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.2 percentage points to 28.2%. This increase pushes the bearish sentiment reading closer to its historical average of 30.5%. Bearish sentiment last passed its historical average level on August 7, 2014.

Keeping many individual investors optimistic about the short-term direction of stock prices is the S&P 500’s overall upward momentum, earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Causing other AAII members to be pessimistic are prevailing valuations, the failure of the S&P 500 to set new highs, events in the Middle East and Ukraine, the pace of economic growth and Washington politics.

This week’s AAII Sentiment Survey results:

  • Bullish: 41.8%, down 0.4 percentage points
  • Neutral: 29.9%, down 4.9 percentage points
  • Bearish: 28.2%, up 5.2 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:

« Newer EntriesOlder Entries »