Investors' Incredible Shrinking Stock Allocations

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The chart shown may confuse some because it is, in fact, a flow-of-funds chart rather than a net allocation chart. The normalized allocation among individual investors is 60% which, as one comment points out, would naturally drop with the drop in the market. This chart, however, does not portray that allocation. Rather, it portrays the changes in allocations brought on by adding or deleting stock from portfolios, and the rate at which those changes occur. Thus, if this graphed line held steady at 0% (third line up from the red line) it would mean that the allocations remained relatively constant. As AAII members consciously increase or decrease their absolute holdings, however, the graph moves higher or lower (i.e., up or down from 0% change).

Bruce Lick of MN 12:17PM December 03, 2008

If stock market prices are down 50%, how can there possibly be a large buildup in sideline cash? Nobody that I know! We can only wish!!!! The clients I studiply have remained 100% in the market-I think this is the usual case!
I say entire portfolios have plummeted thanks to this great stock market-cash remains virtually the same while the market is down 40-50%-of course, the percentage allocation to stock is down!! Please do the math!

Jeff Haskett, CPA of CA 4:16AM November 23, 2008

My recent (last few years) "allocation" has been 95% FDIC bank CDs and 5% stocks. Obviously, I have regretted not selling the 5% starting in November, 2007. It's now about 3%.
I don't plan to go headlong into stocks, even now. Remember, the depression started in 1929 and the market bottomed in 1932.

of 1:09PM November 21, 2008