401(k) participants are behaving much better, according to T. Rowe Price. Less than 2 percent of the company’s participants took any investment action during the August 2015 and January 2016 market fluctuations.
Similar behavior was seen among personal investors in both instances, says Judith Ward, CFP, senior financial planner and vice president of T. Rowe Price Investment Services.
While Web activity and call center volumes increased around both market events, very few investors made investment changes. Workplace and personal investors view their accounts as long-term investments and are weathering the current period of market volatility.
“While the stock market has enjoyed significant gains over the past six years, there have been two significant market events over the past six months that have caught investors’ attention,” Ward writes.
“On August 24, 2015, the Shanghai Composite Index dropped 8.5 percent for its biggest sell-off since 2007. The U.S. markets responded with their biggest sell-off in four years, dropping more than 1,000 points in early trading, and the DJIA ended the month down 1,100 points (6.6 percent). January started off 2016 with U.S. stocks having the worst 10-day start on record as global equities and commodities tumbled due to growth concerns in China and 12-year oil price lows.”
And thankfully, she notes, not much happened.
“In spite of the August and January market events, the vast majority of personal and workplace investors have stayed the course. On both occasions, fewer than 2 percent of T. Rowe Price’s 2 million plan participants took an investment action. Similarly, although looking at just one day (August 24, 2015), the vast majority of personal investors took no action, with less than 2 percent exchanging.”
In both market incidents, Ward adds, T. Rowe Price did find that workplace investors were hungry for information. In August, call center activity around 401(k)s increased 43 percent from normal levels, and traffic to the retirement plan website was 58 percent higher. January saw a similar increase as call center activity was 30 percent above normal levels and retirement plan website traffic increased 56 percent. Call volume and website visits for personal investors in January was in line with activity in prior years.
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.