The American Association of Individual Investors is deeply saddened to announce the death of James (“Jim”) Cloonan.
Cloonan founded the association in 1978 for the purpose of helping individual investors become better managers of their own assets. Fixed brokerage commissions had ended a few years prior. But, through his work in the industry and as a professor at DePaul University, he observed the difficulty individual investors had in getting unbiased information at that time. As he reflected in 2017, “there was nothing to back up the individual investor.”
Over its now 42-year existence, AAII has helped more than two million individuals become better and smarter investors. We at the organization will continue to fulfill Cloonan’s mission of empowering individual investors through programs of education, information and research.
In one of his first articles for the AAII Journal, “The Position of the Individual Investor,” Cloonan explained how individual investors could succeed. One of the key advantages he saw individual investors having over institutional investors was flexibility. Individual investors have the ability to invest in a greater range of investments, change their investment direction more quickly and tailor their objectives more specifically. “On balance, it appears that the individual investor is at least as well off as the institution and probably has an advantage,” argued Cloonan.
The concept of greater flexibility carried over to AAII’s Model Shadow Stock Portfolio. Incorporating the concepts presented in Eugene Fama and Kenneth French’s seminal paper, “Common Risk Factors in the Returns on Stocks and Bonds” (Journal of Economics, February 1993), this remains one of the longest-running factor portfolios. Cloonan created it to provide an example of how individual investors could use academic research to their benefit. The Model Shadow Stock Portfolio’s annualized return of 13.8% through November 30, 2020, is well in excess of the S&P 500’s annualized return of 9.9%.
Cloonan was also notable for his views on risk. He viewed volatility as a phantom risk. Though volatility influences short-term returns, long-term investors should not be concerned with it. Rather, their focus should be on maximizing the long-term growth of wealth. This focus should not be narrow-sighted, however. Investors must diversify to limit the impact of stock-specific risk, while also ensuring they have the assets needed to fund withdrawals at the time those withdrawals are needed.
Cloonan earned his MBA from the University of Chicago and his B.A. and Ph.D. from Northwestern University. After teaching for several years, in 1974 he helped found and served as CEO of Heinold Securities, a brokerage firm specializing in options. After selling his interest in that firm, he returned to teaching and began the preliminary work leading to the founding of the American Association of Individual Investors in 1978.
There was more to Jim than just investing. He was a strong supporter of the arts, an avid traveler and a fan of Northwestern University football. The son of one of Eliot Ness’ original Untouchables, Cloonan fought in Korea and was awarded the Bronze Star.
Around the office, he went by “Jim.” He was kind and insightful. Though Cloonan retired at the start of 2018, the collegial environment he established at the organization continues to this day even as those at the organization work virtually. He will be sincerely missed.
Jim is survived by the love of his life, his wife of 50 years, Edythe, four children, seven grandchildren and three great grandchildren. Edie played a big role in helping start AAII, as did other members of Jim’s family.
To honor James Cloonan, a tribute page discussing his legacy and the impact he had on individual investors has been created: www.aaii.com/jimcloonan.
About AAII
The American Association of Individual Investors is an independent, nonprofit corporation formed for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research. More information about AAII can be found at www.aaii.com.
