AAII Model Portfolios
by CI Staff
AAII’s model portfolios are one of the most popular and widely used areas of our website. However, not all members know exactly where to find all the necessary information, and many may not be aware of all the ways the model portfolios can be used to help in the investment research process. In addition, the AAII Model Fund Portfolio has undergone a major recent change.
This installment of AAII Online discusses the various features of the model portfolios and the changes recently incorporated into the AAII Model Fund Portfolio.
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Model Shadow Stock Portfolio
James Cloonan, AAII’s chairman and founder, started the Model Shadow Stock Portfolio in 1993. The portfolio is made up of micro-cap value stocks. As the name implies, the portfolio is made up of stocks that live in the “shadows”; they have been overlooked by Wall Street analysts due to their size. Cloonan believes that, instead of competing with the institutional investors, choosing among these small out-of-the-spotlight stocks based on a few key fundamentals is the best way for individual investors to generate returns. Time has proven that the methodology is sound: Although the Model Shadow Stock Portfolio can be volatile year to year, it has excelled over the long term.
To navigate to the Model Shadow Stock portfolio, click on the Model Portfolios tab on the AAII home page and then select the red Stock Portfolio button (Figure 1). At the Model Shadow Stock Portfolio page, you will find the actual portfolio holdings along with relevant fundamental data for each stock. Additionally, AAII provides a link to the Standard and Poor’s report for each stock, if available. You can download this table into a spreadsheet by clicking on Download Spreadsheet above this list.
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Below the current Model Shadow Stock Portfolio is a Passing Companies List. This list shows the stocks that are currently meeting the requirements to be considered for the Shadow Stock portfolio. This list is updated monthly. Many members use this list as a starting point when building their own Shadow Stock portfolios.
On the right-hand side of the page, a detailed user’s guide is provided to those who are new to the Model Shadow Stock Portfolio and need help getting started. Underneath the user’s guide are links to the portfolio selection rules and a frequently-asked-questionspage. Even for members who are familiar with the portfolio, reading through the guide, rules and FAQs can help you better understand how to use the Model Shadow Stock Portfolio to your benefit.
The next section on the right gives links to a performance chart and table showing the actual returns the portfolio has achieved each year. Clicking on Transaction History brings up a list showing when each stock was added to or removed from the portfolio. There is also a link on this page to a detailed transaction list that includes the actual trade price, number of shares and commission paid.
Cloonan reviews the holdings in the portfolio four times a year and writes a commentary discussing the performance and any changes he is making to the portfolio. An archive of his past commentaries is provided on the right-hand side of the page below the performance links. Reading through these can give you insights into how decisions are made and issues are handled when managing a portfolio of small-cap stocks.
AAII also hosts a Model Portfolio discussion board that allows members to communicate with each other about their experiences with the portfolio.
To receive notification whenever there is an update to the Model Shadow Stock Portfolio, click on the RSS feed at the bottom right. Once you set up your free subscription, notifications will be sent directly to your preferred home page or RSS reader.
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Model Fund Portfolio
The Model Fund Portfolio has been a part of AAII’s offerings since the middle of 2003. Originally, the Model Fund Portfolio consisted entirely of mutual funds. However, at the beginning of July 2012, the Model Fund Portfolio underwent a major change, shedding half of the weaker mutual funds and incorporating more inexpensive exchange-traded fundsfor certain core holdings. The thought was that for these core sectors, the additional expense of a mutual fund did not provide enough added value to warrant inclusion.
To navigate to the Model Fund area, select the Model Portfolios tab and then click on the yellow Fund Portfolio button. Like the Model Shadow Stock Portfolio area, the Model Fund Portfolio area shows the current portfolio along with relative fundamental data for each of the funds. At the bottom of the table, we give average performance figures for the funds currently in the portfolio along with actual portfolio performance (based on funds actually held).
As in the Model Shadow Stock Portfolio area, the right-hand side of the page houses links to the user’s guide, fund selection rules and FAQs. In addition, a fund classifications link outlines how we have grouped the funds by size based on their market capitalization.
Performance for the Model Fund Portfolio is shown both on a historical return chart and in a year-by-year performance table. A transaction history page shows when funds were added to or removed from the portfolio.
You will find the commentary archive below the performance links. The fund portfolio also includes a discussion board and RSS feeds to keep members up to date.
Model Portfolio Emails
AAII’s Model Portfolios are each reviewed on a quarterly basis and this is when changes to the portfolios may be made. However, performance figures and the stock Passing Companies List are updated once a month on AAII.com. The easiest way to keep up with the portfolio updates is to subscribe to the AAII Model Portfolio Update email, free to all AAII members (Figure 2).
To see which AAII emails you are currently signed up for, click on My Account at the top-right of the AAII website after you have logged in, and scroll down to the second box labeled My AAII Emails. To change your settings, click on Update My AAII Emails at the bottom of the box. This page lists each email offered by AAII and provides an option for you to either opt-in or opt-out of each.
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The AAII Model Portfolio Update email is sent out on the 15th of each month. It presents the past month and year-to-date performance for each portfolio and also alerts you to any changes that have been made.
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