The latest monthly data from the AAII shows that bonds and cash are still the asset of choice for small investors. The allocation in equities remains very low historically (via AAII):
Individual investors allocated 51.7% of their portfolios to stocks and stock funds last month, a 1.2 percentage point drop from June. The historical average is 60%.
Bonds and bond funds accounted for 24% of individual investors’ portfolios. This was a 2.4 percentage point increase from June. This historical average is 15%.
Cash accounted for 24.3% of portfolios, a 1.3 percentage point drop from June. The historical average is 25%.
Equity allocations have been below the historical average for most of 2010 and the July results show that this trend is continuing. Market volatility and economic uncertainty are causing individual investors to stay defensive. Many are focused on income generation, either through dividend-paying stocks or bonds.
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.