August AAII Asset Allocation Survey: Equity Holdings Decline While Fixed Income Allocations Remain Unchanged
Cash holdings rose among individual investors last month, according to the August AAII Asset Allocation survey. Equity holdings declined, while fixed income allocations were essentially unchanged.
Stock and stock fund allocations declined by 2.9 percentage points to 62.3%. This reversed last month’s increase, but kept equity allocations within the range that has held throughout most of this year. August was the fifth consecutive month and the seventh out of the past eight months with stock and stock fund allocations above their historical average of 60%.
Bond and bond fund allocations increased 0.1 percentage points to 17.2%. August was the third consecutive month with fixed-income allocations coming in at either 17.1% or 17.2%. August was also the 50th consecutive month with bond and bond fund allocations above their historical average of 16%.
Cash allocations rebounded by 2.8 percentage points to 20.5%. August was just the third month in the last eight months with a cash allocation reading above 20%. August was also the 21st consecutive month with cash allocations below their historical average of 24%.
Fixed-income allocations seem to be holding a new lower, albeit still above average, range…
Some of the money appears to be moving into cash as can be seen by the second reading above 20% in three months. Equity allocations, conversely, are mostly fluctuating within a four percentage-point range.
The numbers are indicative of the ongoing uncertainty facing individual investors. Current stock valuations, uncertainty about when the Federal Reserve will begin tapering its bond purchases and frustration with a lack of key progress by Congress and the president are all influencing AAII members’ sentiment towards stocks and bonds. Many of AAII members take a long-term approach towards their portfolio allocations and although there are small changes, nothing has occurred to prompt the majority of survey respondents to make significant changes with their allocations.
Last month’s special question asked AAII members what changes they made, if any, in response to the S&P 500’s 18% rise during the first seven months of 2013. One out of four respondents (26%) said they haven’t made any changes. Approximately 16% of respondents said they raised cash, while 14% said they increasd their equity allocations. Bond allocations were reduced by 11%.
Here is a sampling of the responses:
· “I have taken some profits on bond funds and held cash for a market dip in dividend paying stocks.”
· “The only real change has been to sell stocks I felt were extremely high and purchase others I thought were rather low.”
· “I moved to shorten my duration on investment grade bonds.”
· “I moved a significant amount of my portfolio into cash.”
· “I’ve been slowly increasing cash. Long term, I’m still positive on equities, but I’m waiting for a better entry point.”
· “Pretty much no change; bond expirations have been boosting my cash balance.”
August Asset Allocation Survey results:
· Stocks and Stock Funds: 62.3%, down 2.9 percentage points
· Bonds and Bond Funds: 17.2%, up 0.1 percentage points
· Cash: 20.5%, up 2.8 percentage points
August Asset Allocation Survey details:
· Stocks: 30.4%, down 2.4 percentage points
· Stock Funds: 31.9%, down 0.5 percentage points
· Bonds: 3.8%, up 0.2 percentage points
· Bond Funds: 13.4%, unchanged
· Cash: 20.5%, up 2.8 percentage points
*The numbers are rounded and may not add up to 100%.
· Stocks/Stock Funds: 60%
· Bonds/Bond Funds: 16%
· Cash: 24%
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 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