Special note: Our Investor Conference will take place starting this Saturday at Bally’s Las Vegas. We will be recording the sessions and posting them online throughout the conference. Those of you who are not attending can access the recordings by purchasing the AAII Investor Conference Audio package.

I recently looked at my 403(b) plan, which is the equivalent of a 401(k) plan, for the first time in approximately six months. Even with the market’s recent correction, my portfolio was fine. Now that I’ve looked, I don’t plan on checking it again for another six months.

Sounds heretical, doesn’t it? A financial professional not looking at his account?! I’d argue there is bliss in controlled ignorance. Not knowing what the balance is, and quickly forgetting it once reminded, helps to avoid anchoring. I’m neither shocked nor surprised when I do look at my account balance because I don’t remember exactly what it was the last time I looked.

Keep in mind that I am aware of what is going on with my account. Vanguard emails transaction statements when my payroll deductions are deposited so I know when activity has occurred. I just don’t know what the account balance is. (The same applies to my other brokerage accounts.) And that’s good because I should focus on the process and not the short-term results.

Think about it. What control do you or I have over how the asset classes we invest in perform? Here’s the answer: none. We can choose what we invest in. We can choose how much we allocate to each asset class. We can decide when we get in and when we get out. We can even choose the vehicle (a stock, a mutual fund, an ETF, etc.). We cannot choose the return we’ll get. That’s completely beyond our control.

So, why focus on the account balance? Looking the number frequently won’t make you a better investor.

What will make you a better investor is the process you follow. How much are you setting aside for retirement and other future expenses? Are you contributing to your savings frequently? If you are retired, are you limiting portfolio withdrawals to a sustainable level? Do you have a disciplined, well-thought-out plan you can stick to regardless of what the market is doing? Have you set up the proper barriers to limit the effect emotions will have on your portfolio? Is your portfolio properly allocated given your financial goals, investment time horizon, financial tolerance for risk and your emotional tolerance for risk? Do you have clear buy and sell rules for the securities and/or funds you invest in?

These are the type of things you should focus on. They are within your control. What the financial markets do to your account balance isn’t.

When I actually do look at my accounts, it’s with a purpose. I check my 403(b) account to see if I need to rebalance. I use an equal-weighting methodology with a target allocation of 20% for each of the five funds I hold in my portfolio. I specifically check at the end of April and the end of October (the separation points between the best and worst six-month periods for stocks) to see if any of the funds’ weighting is more than five percentage points above or below target. If so, I rebalance. If not, I do nothing and then don’t look at the account again for another six months, with the exception of monitoring the transaction email notifications.

As far as my recent check goes, it turns out that I didn’t need to do anything. An error in calculating the fund weightings caused me to rebalance. I calculated one fund as being five percentage points off target, when it was really just one percentage point off. It was a silly (but fortunately minor) mathematical error on my part, and an example of how even those of us who regularly write about finance aren’t perfect. In response, I’ve set up a spreadsheet specifically designed for the account that will automate the calculations to prevent the error from recurring in the future. In investing, as is the case with many other activities, process is important.

• The Changes I Made to My Portfolio – Two years ago, I explained how I allocated my 403(b) plan and the rationale behind my fund choices. I continue to maintain the same allocation.
  
• Best Practices for Rebalancing – My preference for periodic rebalancing was inspired by this Vanguard study.
  
• How Often Do You Look at Your Investment Accounts? – Tell us on the AAII.com Discussion Boards.
  

The U.S. financial markets will be open on Wednesday, but the banks will be closed in observance of Veterans Day. On behalf of everyone at AAII, thank you to those of you who served or are currently serving in the military.

Nearly 20 S&P 500 member companies will report earnings next week, including Dow Jones industrial average component Cisco Systems (CSCO) on Thursday. Retailers will begin to take the stage with Macy's (M) reporting on Wednesday and Kohl's (KSS) and Nordstrom (JWN) reporting on Thursday.

The first economic report of note will be October import and export prices, released on Tuesday. Thursday will feature the September Job Openings and Labor Turnover Survey (JOLTS). The October Producer Price Index (PPI), October retail sales, September business inventories and the University of Michigan's preliminary November consumer sentiment survey will be released on Friday.

Several Federal Reserve officials will make public appearances: Boston president Eric Rosengren on Monday; St. Louis president James Bullard, Richmond president Jeffrey Lacker, Chicago president Charles Evans and New York president William Dudley on Thursday; and Cleveland president Loretta Mester on Friday.

The Treasury Department will auction $24 billion of three-year notes on Monday, $24 billion of 10-year notes on Tuesday and $16 billion of 30-year bonds on Thursday.

Pessimism among individual investors about the short-term direction of stocks fell to its second-lowest level of the year in the latest AAII Sentiment Survey. At the same time, neutral sentiment rose to a three-month high, while optimism pulled back to its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined by 1.4 percentage points to 39.0%, essentially matching its historical average. This is first time optimism has been at or above 39% on consecutive weeks since February 12 through March 5, 2015.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 3.4 percentage points to 42.4%. The increase puts neutral sentiment at its highest level since August 6, 2015. This is the eighth consecutive week and the 42nd week this year that neutral sentiment is above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 2.0 percentage points to 18.6%. Pessimism was last lower on February 19, 2015 (17.9%). This is the fifth consecutive week with a bearish sentiment reading below the historical average of 30.0%, the longest such streak since April 9 through June 4, 2015.

At current levels, pessimism is at an unusually low level and neutral sentiment is at an unusually high level. Though low levels of bearish sentiment may seem like a contrary indicator, the average underperformance of the S&P 500 over the following 26- and 52-week periods has not been significant. Unusually high levels of neutral sentiment have been associated with better-than-average S&P 500 performance, however. (See Unusually High Neutral Sentiment Often Followed by Good Returns for more information.)

As the S&P 500 has rebounded off of its late September lows, pessimism has fallen by a cumulative 21.3 percentage points. Optimism has increased by a much smaller amount, however: 10.9 percentage points. Upward price momentum, seasonal trends, and potentially better-than-forecast third-quarter earnings surprises are having a positive impact. Nonetheless, some AAII members remained concerned about global and international events (particularly China as well as global economic weakness), U.S. monetary policy, U.S. politics and the pace of U.S. economic growth.

Since our Investor Conference, which will start on Saturday, is being held at Bally’s Las Vegas, this week’s special question asked AAII members what they like to gamble on. One-third of all respondents said they do not gamble. Slightly more than 20% said they gamble on stocks. Casino games, particularly slots and craps, were named by 14% of respondents. Nearly 9% said they bet on card games, especially blackjack.

Bullish: 39%, down 1.4 points
Neutral: 42.4%, up 3.4 points
Bearish: 18.6%, down 2.0 points


Bullish: 39.0%
Neutral: 31.0%
Bearish: 30.0%

In a reversal of the prior month, equity allocations among individual investors rose and cash allocations fell in October, according to the latest AAII Asset Allocation Survey. Fixed-income allocations rose slightly.

Stock and stock fund allocations rebounded by 1.1 percentage points to 64.7%. The increase keeps stock and stock fund allocations above their historical average of 60% for the 31st consecutive month.

Bond and bond fund allocations rose 0.1 percentage points to 16.6%. The modest increase puts fixed-income allocations at a nine-month high. October was the third consecutive month with fixed-income allocations above their historical average of 16.0%.

Cash allocations pulled back by 1.3 percentage points to 18.7%. October was the 47th consecutive month with a cash allocation reading below its historical average of 24%.

Last month saw a reversal in equity and cash allocations. Equity allocations had fallen to their lowest level in more than two years in September, before rebounding in October. Cash allocations, conversely, pulled back from what was a two-year high. Even with the increase, equity allocations are at the second-lowest level of 2015. Though the major indexes had good returns in October, individual investor optimism in our weekly sentiment survey remained below average for most of the month.

Last month’s special question asked AAII members why they are or are not allocating to international markets. Nearly a third of all respondents (32%) said they are not allocating to international markets. Many of these individual investors thought U.S. stocks offer better investment opportunities; others thought foreign markets were too risky or said they lacked enough information to invest overseas. About 24% of respondents said they were allocating to international markets for reasons of diversification and/or to take advantage of the global economy. Slightly more than 12% of respondents thought international stocks offered good opportunities for returns. (Some members listed both diversification and the possibility of higher returns as reasons.) About 7% said they had exposure through large U.S. companies or through their funds.

Several respondents volunteered their allocation to foreign markets. Most commonly, these individual investors allocated between 5% and 20% of their portfolios to foreign securities.

Here is a sampling of the responses:

• "I diversify because it is a global economy.”
• "I am allocating to international markets because that is where the growth will be.”
• "I do not allocate to international markets due to political instability, problems with their economy and civil unrest.”
• "I get exposure to international markets through U.S. companies.”
• "There is not as much good information available for foreign markets and stocks.”

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/investor-surveys.

• Stocks and Stock Funds: 64.7%, up 1.1 percentage points
• Bonds and Bond Funds: 16.6%, up 0.1 percentage points
• Cash: 18.7%, down 1.3 percentage points

• Stocks: 31.2%, up 0.4 percentage points
• Stock Funds: 33.5%, up 0.7 percentage points
• Bonds: 3.1%, down 0.8 percentage points
• Bond Funds: 13.6%, up 1.0 percentage points

Take the Asset Allocation Survey.

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