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Individual investors held 50.9% of their portfolios in stocks and stock funds according to the May 2010 AAII Asset Allocation Survey. This is a 9.5 percentage-point drop from April and the smallest allocation to equities since May 2009. The historical average is 60%.

Bond and bond funds accounted for 25.5% of individual investor portfolios. This is the highest allocation to fixed income since the survey started in November 1990. The percentage of portfolio dollars held in bonds and bond funds rose 5.1 percentage points from April. The historical average is 15%.

Individual investors kept 23.6% of their portfolio dollars in cash, a 4.4 percentage point increase. The historical average is 25%.

Individual investors placed a greater emphasis on return of capital last month because of the volatility in the stock markets. The movement of portfolio dollars out of equities and into bonds/bond funds and cash corresponds with the latest AAII Sentiment Survey, which showed bearish sentiment at 50.9%, the highest level of pessimism recorded since November 5, 2009. (Bearish sentiment is the expectation that stock prices will fall over the next six months.)

It should be noted that although equity allocations are down significantly from last month, they are not at levels that suggest investors are eschewing stocks and stock funds. The numbers do, however, signal a more conservative investment strategy.

May Asset Allocation Survey Results:

  • Stocks and Stock Funds: 50.9%, down 9.5 percentage points
  • Bonds and Bond Funds: 25.5%, up 5.1 percentage points
  • Cash: 23.6%, up 4.4 percentage points

Asset Category Detail:

  • Stocks: 26.2% down, 1.6 percentage points
  • Stock Mutual Funds: 24.8%, down 7.9 percentage points
  • Bonds: 6.6%, up 1.4 percentage point
  • Bond Mutual Funds: 18.8%, up 3.7 percentage points

Historical Averages

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

The survey and its results are available online here.