Asset Allocation Survey: Portfolios Shift To Bonds And Cash

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 |  Includes: STIP, TIP, TRSY
by: AAII

AAII’s Asset Allocation Survey reveals that Individual Investors took a more defensive stance during August, increasing their portfolio allocations to cash and bonds while decreasing allocations to stock holdings. Stock and stock fund allocations dropped to an 11-month low. AAII members allocated 55.3% of their portfolios to stocks and stock funds last month, a decrease of 7.1 percentage points from July and well below the historical average of 60%.

Bond and bond fund allocations increased 3.3 percentage points to 21.6%. This is the highest allocation to fixed-income securities and funds since November 2010. Bond and bond fund allocations have now been above their historical average of 15% for 27 consecutive months.

Cash allocations climbed 3.8 percentage points to 23.1%. Even with such a strong increase in the allocation to cash, this was the 21st time in the past 23 months that cash allocations have been below their historical average of 25%.

Last month’s special question asked AAII members what their rationale was for allocating to cash. Responses mostly centered around one of three reasons: saving for future stock purchases, preserving capital or saving for future expenses. Many AAII members said they were waiting for stocks to reach bargain prices. Several members set aside cash to cover required minimum distributions from IRAs and other expenses. Others expressed uncertainty about the economy and stock prices.

Here is a sampling of the responses:

  • “Dry powder for the eventual return to an uptrend.”
  • “I’m holding cash both as an emergency fund and to invest when I find a good opportunity.”
  • “I want to have two years of required minimum withdrawals in cash.”
  • “The fluctuating market makes it scary to be totally invested.”
  • “I like the security of cash now. When I feel the politicians are serious about improving the economy, I will add to my equity holdings.”

August Asset Allocation Survey Results:

  • Stocks Total: 55.3%, down 7.1 percentage points
  • Bonds Total: 21.6%, up 3.3 percentage points
  • Cash: 23.1%, up 3.8 percentage points

Asset Allocation details:

  • Stocks: 27.2%, down 4.3 percentage points
  • Stock Funds: 28.1%, down 2.8 percentage points
  • Bonds: 5.7%, up 0.6 percentage points
  • Bond Funds: 15.9%, up 2.7 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: http://www.aaii.com/assetallocationsurvey.