Individual investors’ exposure to equity investments reached a seven-month high in November according to the latest AAII Asset Allocation Survey. Fixed-income exposure also rose, while cash allocations pulled back.
Stock and stock fund allocations rose 2.3 percentage points to 67.0%. Equity allocations were last higher in April 2019 (67.8%). The rise keeps stock and stock fund allocations above their historical average of 61.0% for the 80th consecutive month.
Bond and bond fund allocations rebounded by 0.4 percentage points to 18.7%. Fixed-income allocations are above their historical average of 16.0% for the ninth consecutive month and the 10th time in 11 months.
Cash allocations fell 2.7% percentage points to 14.3%. This is the smallest exposure to cash since January 2018 (13.3%). The drop also keeps cash allocations below their historical average of 23.0% for the 96th consecutive month.
New record highs for the major stock indexes helped to boost the value of individual investors’ equity holdings. At the same time, optimism about the short-term direction of stock prices was above its historical average on consecutive weeks in our weekly AAII Sentiment Survey during November for the first time since May 2019.
November’s special question asked AAII members if they intentionally allocated to international investments. Three out of five respondents (60%) say that they do intentionally allocate to international markets. Reasoning in this group varies but a majority cite diversification, potential growth in emerging markets and a greater number of investment opportunities as their rationale.
Conversely, 31% of respondents state that they do not purposely allocate to international investments. Some within this group say while they do hold some international investments, their allocation to them is not intentional. Others within this group view international investments as adding too much complexity given changing exchange rates and unfamiliarity with foreign economies and companies. Additionally, 9% of respondents state that they occasionally invest in international markets, with some saying they do so to take advantage of bargain opportunities when the U.S. dollar is perceived as being overvalued.
Here is a sampling of the responses:
- “I do not as I am of retirement age and do not want to be subject to currency swings or political events in foreign countries.”
- “I do because I believe that there are opportunities in the future. Regardless of the political rhetoric, we live in a global community and economy.”
- “Only a small amount. American equity already has a lot of foreign exposure.”
- “I do not. Since I am more aware of, and educated on, domestic investments, I feel more comfortable staying ‘home.’”
- “Many companies I invest in have major positions internationally. I avoid China because accounting standards are not up to ours; however, I do have a small position in an international dividend stock ETF.”
As of December 2, 2019
American Association of Individual Investors
November AAII Asset Allocation Survey results:
- Stocks and stock funds: 67.0%, up 2.3 percentage points
- Bonds and bond funds: 18.7%, up 0.4 percentage points
- Cash: 14.3%, down 2.7 percentage points
November AAII Asset Allocation Survey details:
- Stocks: 27.9%, down 0.2 percentage points
- Stock funds: 39.1%, up 2.5 percentage points
- Bonds: 3.8%, down 0.3 percentage points
- Bond funds: 15.0%, up 0.7 percentage points
- Stocks/Stock Funds: 61.0%
- Bonds/Bond Funds: 16.0%
- Cash: 23.0%
The numbers are rounded and may not add up to 100%.
The AAII Asset Allocation Survey has been conducted monthly since November 1987. The survey and its results are available online.
Want to weigh in? Take the survey yourself and see results online.