Equity Allocations Match 2007 Levels

Includes: BND, DIA, IVV, QQQ, SPY
by: AAII


Stock and stock fund allocations are the highest they've been since June 2007.

Cash allocations remain below their historical average for the 40th month in a row.

Investors weigh in on their biggest asset allocation mistakes during this bull market.

Individual investors' allocations to stocks and stock funds are now at levels last seen in June 2007, according to the March AAII Asset Allocation Survey. Bond and bond fund allocations rose slightly while cash allocations declined.

Stock and stock fund allocations rose 0.3 percentage points to 68.6%, matching June 2007's equity allocation. Stock and stock fund allocations have now been at or above their historical average of 60% for 24 consecutive months, and for 26 out of the past 27 months.

Bond and bond fund allocations increased by a nominal 0.1 percentage points to 16.5%. March was the 10th consecutive month with fixed-income allocations at or above their historical average of 16%.

Cash allocations fell 0.4 percentage points to 14.9%. March was the 40th consecutive month with cash allocations below their historical average of 24%.

Equity allocations are now at their third-highest level in the past 10 years. Only April 2006 (70.3%) and February 2007 (68.7%) had larger allocations. Larger equity allocations have been registered by our survey prior to 2006, with a record 77.0% allocation to stocks and stock funds occurring in January and March of 2000.

A combination of longer-term approaches to portfolio management and a lack of good alternatives may have contributed to the rise in equity allocations. From a return standpoint, the equity markets pulled back last month. Sentiment about the short-term direction of stock prices among our members largely stayed below average last month as well. Yields on the benchmark 10-year Treasury note fluctuated throughout March, ultimately ending down slightly.

Last month's special question asked AAII members about the biggest mistake they have made over the six-year course of the current bull market. We received a wide range of responses. Nearly 15% of respondents said that they did not hold a large enough allocation to stocks, and an additional 5% said they waited too long to buy stocks or boost their allocations. More than 8% said that they held onto too much cash. Allocating too much to bonds and bond funds was the mistake cited by 7% of respondents. About 15% said that they either invested in the wrong industry or sector (e.g. energy, gold mining, etc.) or failed to invest in the best-performing industries (e.g., biotech, healthcare).

Slightly more than 11% of respondents said they did not make any allocation mistakes. Many of these AAII members said they stuck to their long-term allocation strategies throughout the current bull market.

March AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 68.6%, up 0.3 percentage points
  • Bonds and Bond Funds: 16.5%, down 0.1 percentage points
  • Cash: 14.9%, down 0.4 percentage points

March AAII Asset Allocation details:

  • Stocks: 32.8%, down 1.1 percentage points
  • Stock Funds: 35.8%, up 1.4 percentage points
  • Bonds: 3.9%, up 0.7 percentage points
  • Bond Funds: 12.6%, down 0.5 percentage points

Historical Averages:

  • Stocks/Stock Funds: 60%
  • Bonds/Bond Funds: 16%
  • Cash: 24%

*The numbers are rounded and may not add up to 100%.

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 here.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.