Individual investors boosted their equity allocations last month to nearly an 18-month high, according to the January AAII Asset Allocation Survey.
AAII members allocated 61.4% of their portfolios to stocks and stock funds last month, an increase of 2.8 percentage points. This is the highest equity allocations have been since July 2011. The historical average is 60%.
Fixed-income allocations declined 0.6 percentage points to 20.2%. This is a six-month low and the fourth consecutive monthly drop. Even with the decrease, fixed-income allocations remained above their historical average of 16% for the 43rd consecutive month.
Cash allocations dropped 2.2 percentage points to 18.4%. This is a four-month low. Cash allocations have been below their historical average of 24% for 14 consecutive months.
The increased allocation to stocks and stock funds is not surprising. January was a strong month for the stock market and optimism among individual investors about the short-term direction of stock prices has improved. Clarity about the tax rates, the avoidance of the fiscal cliff and continued economic growth also helped. Many of our members follow long-term allocation strategies and the modest changes in the allocation percentages reflect this.
January AAII Asset Allocation Survey results:
- Stocks Total: 61.4%, up 2.8 percentage points
- Bonds Total: 20.2%, down 0.6 percentage points
- Cash: 18.4%, down 2.2 percentage points
January AAII Asset Allocation Survey details
- Stock Funds: 32.4%, up 4.4 percentage points
- Stocks: 29.0%, down 1.7 percentage points
- Bond Funds: 16.0%, down 0.3 percentage points
- Bonds: 4.2%, down 0.3 percentage points
- Stocks/Stock Funds: 60%
- Bonds/Bond Funds: 16%
- Cash: 24%
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/investor-surveys.
Charles Rotblut. CFA is a Vice President with the American Association of Individual Investors and editor of the AAII Journal.