Light trading among 401k participants in May ended a two-decade trend.
“401k investors bucked the adage to sell in May and stay away,” the Alight Solutions 401k Index reported in its latest release of May 401k trading activity. “On average, net daily trading was 0.011% of 401k balances—the lowest monthly value in the more than 20-year history of the 401k Index.”
Additionally, there was one day of above-normal activity—the first since January, the Illinois-based Alight added.
Monthly net trading activity was 0.09% of balances, the lowest level on record and less than half the monthly average for the trailing five-year period (0.22%), and 12 days favored fixed income (60% of days in May).
Trading inflows mainly went to stable value, international, and specialty funds, while outflows were primarily from company stock, as well as large and small U.S. equity funds.
After reflecting on market movements and trading activity, average asset allocation in equities increased from 69.8% in April to 69.9% in May. New contributions to equities increased from 68.9% in April to 69.2% in May.
DC trading definitions
Alight defines a “normal” level of relative transfer activity as when the net daily movement of participants’ balances, as a percent of total 401k balances within the Alight Solutions 401k Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity.
A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.
Target date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
