The American Association of Individual Investors (AAII) is an organization that provides investor education. It is a non-profit membership organization with local chapters in all of the United States.
Understanding American Association of Individual Investors (AAII)
The stated goal of AAII is to help individuals take control of their personal portfolios and outperform the standard S&P 500 returns, while engaging in lower amounts of risk. AAII distributes its educational materials mostly through their website AAII.com.
AAII Limitations
Although AAII has provided investors with a wealth of education resources, the worth of membership differs based on the investment strategy that is most popular. In particular, dividend growth investors, who seek investments that provide ever-growing dividends, might not find much value in screeners for stocks, which focus on the performance of prices and the total return and largely disregard dividend payments.
Every stock screen, including ones from non-profit organisations should be scrutinized. Screens like AAII’s do not take into account transaction costs in calculating the percentage return therefore screens that show frequently buying and selling could yield more than what an investor will see in actual. Investors must also take into consideration the amount of assets in the screen when evaluating the performance of the screen.
AAII often boasts of its portfolio’s impressive performance in its marketing materials, however the portfolios of these models may only be accessible to the public once they’ve achieved their impressive gains.
Model portfolios generally are not perfect at the very least for investors who want to follow their example. Model portfolios naturally tend to purchase or sell ahead of the hordes of AAII members. In all other respects the model portfolio will perform the trade at the time it’s most advantageous. The trade becomes less efficient as it’s executed by member after member looking to duplicate the outcomes.
Investors must be aware that even non-profit organisations could be trying to sell something. Hence, any claims of massive outperformance of the market outperformance should be considered with careful examination and investigation.
