AAII Asset Allocation Survey: Bond Holdings at a 10-Month Low

From AAII.com:

Individual investors kept their portfolio allocations to equities essentially unchanged last month, according to the latest AAII Asset Allocation Survey. Stock and stock mutual fund allocations were 62.2% in December. The historical average is 60%.

Bond allocations fell for a third consecutive month. Individual investors held 20% of their portfolios in bonds and bond funds in December, a 1.8 percentage-point decline from November. This is the smallest allocation to fixed income since February 2010. The historical average is 15%.

Cash allocations rebounded by 1.9 percentage points to 17.8%. Despite the increase, cash allocations are merely at a three-month high. The historical average is 20%.

Though individual investors are bullish about the six-month and full-year outlook for stocks, they did not increase their portfolio allocations to equities. This may partially be due to the fact that some AAII members have already shifted their allocations, particularly from bonds to dividend-yielding stocks.

This month’s special question asked AAII members which asset class will perform best in 2011: large-cap stocks, small-cap stocks, international stocks, Treasuries, corporate bonds or precious metals. Respondents said that large-cap and small-cap stocks should deliver the highest total returns, with both asset classes receiving similar numbers of votes. International stocks were also picked by many investors. Bonds, both corporate and Treasuries, received very few votes.

December Asset Allocation Survey Results:

• Stocks and Stock Funds: 62.2%, down 0.1 percentage points
• Bonds and Bond Funds: 20.0%, down 1.9 percentage points
• Cash: 17.8%, up 1.9 percentage points

Asset Category Details:

• Stocks: 29.1%, down 1.4 percentage points
• Stock Funds: 33.1%, up 1.2 percentage points
• Bonds: 4.7%, down 1.2 percentage points
• Bond Funds: 15.3%, down 0.7 percentage points

Historical Averages:

• Stocks/Stock Funds: 60%
• Bonds/Bond Funds: 15%
• Cash: 25%

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.

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