Asset Allocation Survey: Stock Allocations Rise to Six-Month High

Individual investors increased their allocations to stocks last month, according to the October AAII Asset Allocation Survey. Investors placed 60.2% of their portfolio dollars in equities, a six-month high and a five percentage point increase from September. The historical average is 60%.

Allocations to bonds fell 2.4 percentage points to 22.1%. Nonetheless, fixed-income allocations remained above 20% for the ninth time in 10 months. The historical average is 15%.

Cash levels fell 2.6 percentage points to 17.7%. This is the lowest level of cash held in individual investors’ since April 2000. The historical average is 25%.

The increased allocation in stocks corresponds with the data we were seeing in our weekly sentiment survey. Last week, bullish sentiment hit 51.2%, its highest level since May 8, 2000. Additionally, the nominal amounts of interest being paid by money market accounts cannot be ruled out as contributing to the shift out of cash.

This month’s special question asked whether the current yields and bond prices have caused AAII members to shift some of their portfolio dollars from bonds to dividend-paying stocks. Those who said they have not shifted their allocations because of the low bond yields outnumbered those who said they have shifted by greater than a 2:1 margin. However, many respondents said they already held enough dividend-paying stocks, did not own bonds, or were selective about the types of bonds they are holding.

Here is a sampling of the responses:
“I reduced the maturities of my bond holdings.”
“I am already overweighted in dividend-paying stocks.”
“I have not sold any bond funds, but I have used excess cash to buy dividend-paying foreign stock funds.”
“As bonds come due, or extra money is found, I have been buying dividend paying stocks for over a year now. You just can’t find a decent bond right now.”
“I switched from bonds to preferred stocks.”
“50% of my individual stocks are dividend paying or master limited partnerships.”

October Asset Allocation Results:

Stocks and Stock Funds: 60.2%, up 5.0 percentage points
Bonds and Bond Funds: 22.1%, down 2.4% percentage points
Cash: 17.7%, down -2.6% percentage points

Asset Category Details

Stock Mutual Funds: 27.9%, down 1.7% percentage points
Stocks: 32.3%, up 6.6% percentage points
Bond Mutual Funds: 16.1%, down 1.5% percentage points
Bonds: 6.0%, down 0.9% percentage points

Historical Averages:

Stocks Total: 60%
Bonds Total: 15%
Cash: 25%

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: