Small investors aren’t just feeling bullish – they’re acting bullish. According to the AAII‘s November allocation poll small investor equity allocation reached an 11 month high. Charles Rotblut at AAII elaborated on the details:
“Individual investors’ allocations toward stocks and stock funds reached an 11-month high of 62.3% last month, according to the November AAII Asset Allocation Survey. The 2.1 percentage point rise represented the fourth consecutive increase in the amount of portfolio dollars allocated to equities. The historical average is 60%.
Bond and bond fund allocations were essentially unchanged at 21.8%. This was the 10th time in 11 months that fixed income allocations have exceeded 20%. The historical average is 15%.
Cash allocations fell 1.8 percentage points to 15.9%. This is the lowest amount of portfolio dollars held in cash since March 2000, when stock allocations reached 77%. The historical average is 25%.”
Naturally, small investors are chasing the rally. They were very bearish at the bottom and now remain only mildly bullish after the rally. At 62.3% the equity allocation is just above its historical average of 60%. At 21.8% bond allocations are substantially above the average of 15%.
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.
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