AAII Asset Allocation Survey: Investors Heart ETFs and Fixed Income

Individual investors decreased their allocations to equities last month, according to the March AAII Asset Allocation Survey. Stocks and stock funds comprised 61.4% of portfolios, a decrease of 1.9% from February. Even with the decrease, equity allocations remained above their historical average of 60% for the sixth consecutive month.

Bond and bond fund allocations rebounded 3.1% to 20.6%. This is the highest that fixed-income allocations have been since November 2010. It is also the 22nd consecutive month that bond allocations have been above their historical average of 15%.

Cash allocations fell 1.2% to 18.0%. The historical average is 25%.

The decline in stock and stock fund allocations occurred as volatility returned to the equity markets. Optimism about the direction of stock prices was below average for most of the month according to our weekly sentiment survey. A stabilization of Treasury prices may have also contributed to the higher bond and bond fund allocations.

This month’s special question asked AAII members if they are moving money from mutual funds to exchange-traded funds (ETFs), and if so, whether they are also changing what asset classes they are investing in. The majority of respondents said they were not making any such changes. A sizeable minority, however, said they either planned to or already have moved money from mutual funds to ETFs.

Here is a sampling of the responses:

  • “I’m not moving from actively-managed mutual funds to ETFs.”
  • “I choose well-managed mutual funds and try to get a kicker with high-volume ETFs.”
  • “I’ve been moving to ETFs to a small degree and have been selecting them only on their merits, and not for diversification between asset classes.”
  • “I’ve been using 2 – 3 mutual funds as my core investments and choosing specific ETFs as satellite funds.”
  • “Yes, I’ve changed from low-dividend yields in bond mutual funds to higher yielding ETFs.”
  • “Yes, I’ve been moving to ETFs, but my bond allocation has stayed in mutual funds and individual bonds.”

March Asset Allocation Survey Results

  • Stocks and Stock Funds: 61.4%, down 1.9 percentage points
  • Bonds and Bond Funds: 20.6%, up 3.1 percentage points
  • Cash: 18.0%, down 1.2 percentage points

Asset Category Details

  • Stocks: 28.7%, up 0.9 percentage points
  • Stock Funds: 32.7%, down 2.8 percentage points
  • Bonds: 4.5%, up 1.3 percentage points
  • Bond Funds: 16.1%, up 1.7 percentage points
  • Cash: 18.0%

Historical Averages

  • Stocks/Stock Funds: 60%
  • Bonds/Bond Funds: 15%
  • Cash: 25%

Charles Rotblut is the author of the new book Better Good than Lucky: How Savvy Investors Create Fortune with the Risk-Reward Ratio. 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: http://www.aaii.com/assetallocationsurvey

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