If we had to guess, we’d say that investors are at the stage where they’re calling up their brokers every day (or even hour), and investing more.. more and… well even more into their favorite stock (or company). With markets at all time highs, have you ever wondered how much of other people’s portfolios are truly dedicated to U.S. Equities? Not only that, but how portfolio allocation to stocks compares to the last 13 years? You’d think it would be at all-time highs as well, with all the content being shelved to consumers at the moment. Lucky for us, J. Lyons Fund Management has just the chart of 401k Stock Funds Allocation.

(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Stock Twits

We found this chart interesting and while its hard to tell if the % increase is due to new allocations or growth of existing funds (or some combination of both) this chart could be telling us that stocks might be getting a little overdone again. It’s also important to note, that this is looking at stock funds allocation (meaning ETF’s or mutual funds of the S&P 500), and not individual stock holdings.

Now to answer our questions. The 401k investor stock funds allocation is currently at 64% (Disclaimer: Past performance is not necessarily indicative of futures results). In February of 2009, that was only at 48%. But if we look at the larger picture we see, even though stocks are at all-time highs, and stock funds allocation is up 16% post 2008 financial meltdown, it’s gradually on the decline. Before the dot com bubble burst in 2000, 401k investor stock funds allocation was hovering around 75%, and it’s now down to 64% (an -11% decrease) over the course of 13 years (2 Bull markets, 2 Bear markets).

Three implications come to mind when we see these numbers; first that investors may still be in some sort of shell shock from the dot com burst and the 2008 financial meltdown to truly trust all their funds in the stock market; secondly, that an increasing volume of investors may be choosing a combination of investments in their portfolio (such as bonds, cash, and alternatives like managed futures) to find non-correlated return drivers in their portfolios instead of trusting most of their funds to the stock market; thirdly, that no matter where the rest of the 46% allocation is being invested, overall, investors are investing above the general rule of 60% stocks/40% bonds. For additional thoughts on portfolio asset allocation,  see our newsletter, “Why Am I Deviersifying Again?”