AAII Asset Allocations
APPLICABLE TIME FRAME(S):
INTERMEDIATE
UPDATE SCHEDULE:
Each Thursday morning by 9:00 AM EST
REPORTING DELAYS:
None
EXPLANATION:
The AAII (American Association of Individual Investors) is a non-profit organization headquartered in Chicago, and was founded in 1978. Their stated mission is: "assisting individuals in becoming effective managers of their own assets through programs of education, information, and research." It is affiliated with NAIC, the organization that helped so many investment clubs get started in the late 1990's.
Obviously, their niche market is individual investors, and not professional traders, pension funds, or anything else institutional. Their focus, and the focus of the great majority of their membership, is long-term fundamental analysis of sound companies using a very minimal amount of technical analysis for decision-making purposes.
The AAII asset allocation survey is a monthly poll that asks members where their money is currently allocated - in stocks (or stock mutual funds), in bonds (or bond mutual funds) or in cash. This is more of a "real money" gauge than the sentiment survey is.
On our chart, we show a graph of the S&P 500, then AAII members' allocation to stocks and stock mutual funds. Below that, we show the 30-year Treasury Bond, then AAII members' allocation to bonds and bond mutual funds. The last pane on the chart is AAII members' allocation to cash.
GUIDELINES:
Like the traditional AAII sentiment survey, members' asset allocations can be an effective contrary indicator when at an extreme. If we look at April 2000, for example, we see that stock allocations were at 77%, bond allocations were at 8% and cash allocations were at 15%.
That told us that members were extremely exposed to stocks, extremely under-exposed to bonds, and not at all fond of cash. Of course, after that stocks tanked, bonds took off to the upside, and cash was a pretty good place to be.
The allocations do not move nearly as much as the weekly sentiment survey numbers, so we don't see many signals from this data. However, it still pays to frequently monitor the data to find instances when sentiment gets too skewed in one direction or another for each of the three asset classes.
ADDITIONAL RESOURCES:
American Association of Individual Investors (www.aaii.com)
© 2008 Sundial Capital Research, Inc. All Rights Reserved.