By Charles Rotblut, CFA, AAII
Fixed-income and cash allocations rose slightly, while equity allocations declined in the June AAII Asset Allocation Survey.
Stock and stock fund allocations declined 0.9 percentage points to 58.8% last month. This is smallest allocation to equities since December 2011. It is also the second consecutive month that equity allocations have been below their historical average of 60%.
Bond and bond fund allocations rose 0.4 percentage points to 21.3%. This is a four-month high for fixed-income allocations. It is also the 36th consecutive month that fixed-income allocations have been above their historical average of 16%.
Cash allocations rose 0.6 percentage points to 20.0%. Even with the increase, cash allocations were below their historical average of 24% for the seventh consecutive month.
AAII members trimmed their exposure to equities for the third consecutive month due to concerns about the pace of economic growth in the U.S. and developments in the European sovereign debt crisis. Though individual investors are displaying short-term pessimism in our sentiment survey, they have not been making large changes to their portfolios. Rather, equity allocations have declined by less than two percentage points over the past three months. Low current yields and worries that interest rates could move higher in the future continue to leave many investors frustrated about their choices for income-producing investments and have caused some to use dividend-paying stocks for portfolio income.
This month’s special question asked AAII members if they recently changed their exposure to foreign securities. The overwhelming majority of respondents said they have not. The primary reasons were that international assets only accounted for a small portion of the total portfolio, a feeling that U.S.-based multinational companies provided enough exposure to foreign markets, or because they previously reduced their exposure to international securities. A small minority of respondents said they recently increased their international exposure, and an approximately even number said they recently reduced their exposure.
Here is a sampling of the responses:
“I have not changed my exposure to foreign securities because they make up a small percentage of my entire allocation.”
“No change. I have always had and will continue to have very limited exposure to foreign securities.”
“I avoided investing overseas directly for some time. Multinationals provide enough exposure.”
“I have always had and will continue to have very limited exposure to foreign securities.”
June 2012 Asset Allocation Survey results:
Stocks/Stock Funds: 58.8%, down 0.9 percentage points
Bonds/Bond Funds: 21.3%, up 0.4 percentage points
Cash: 20.0%, up 0.6 percentage points
June 2012 Asset Allocation Survey details:
Stocks: 28.3%, down 2.0 percentage points
Stock Funds: 30.4%, up 1.0 percentage points
Bonds: 5.6%, up 0.3 percentage points
Bond Funds: 15.7%, up 0.1%
Stocks/Stock Funds: 60%
Bonds/Bond Funds: 16%
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.