Small investors moved more towards cash in March according to the AAII’s latest asset allocation survey results. Equity and fixed income allocations were slightly down as small investors appear to be moving more towards a cash heavy positioning. This isn’t surprising since we keep hearing that bonds are overvalued and stocks have surged in recent months. The small investor has been known to make the wrong shifts at the wrong times, however so this is sometimes a contrarian indicator.
Here’s Charles Rotblut of AAII with a bit more details:
Cash allocations reached a 16-month high in March, according to the latest AAII Asset Allocation Survey. Individual investors pulled money from both equities and bonds last month.
Allocations to stocks and stock funds fell 3.0 percentage points to 59.5% in March. During the past 15 months, equity allocations have not varied significantly, instead staying within a range of 58.8% (June 2012) to 62.5% (February 2013). The historical average is 60%.
Bond and bond fund allocations declined 1.5 percentage points to 17.7%. This is the smallest allocation to fixed-income securities since February 2011. It is also the 45th consecutive month that bond and bond fund allocations are above their historical average of 16%.
Cash allocations jumped 4.6 percentage points to 22.8%. This is the largest percentage of portfolio assets held in cash since November 2011. Even with the increase, cash allocations remained below their historical average of 24% for the 16th consecutive month.
The rise in cash levels comes as individual investors are grappling with two events. The first is the strong first-quarter performance for stock prices. While some AAII members are more optimistic about the short-term outlook for stocks, others fret that stocks are overbought and are due for a pullback. At the same time, this year’s upward move in Treasury yields and continued signs of economic growth may have caused some investors to reduce their exposure to bonds.
March AAII Asset Allocation survey details:
· Stock Funds: 27.7%, down 1.6 percentage points
· Stocks: 31.8%, down 1.4 percentage points
· Bond Funds: 12.4%, down 3.0 percentage points
· Bonds: 5.3%, up 1.5 percentage points
March AAII Asset Allocation Survey results:
· Stocks Total: 59.5%, down 3.0 percentage points
· Bonds Total: 17.7%, down 1.5 percentage points
· Cash: 22.8%, up 4.6 percentage points
Chart via Orcam Investment Research:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.