A skyrocketing market didn’t sway participants, and most stayed put with the allocations chosen. When trades were made, fixed income fared best.
The Alight Solutions 401(k) Index reports that that the S&P 500 posted its best monthly performance since last November, yet 401k investors lightly traded in the month of October.
Investors tended to be in profit-taking mode, the reason for the movement from equities to fixed income. There was one above-normal trading day—the first since May.
“New contributions to equities decreased from 69.4% in September to 69.2% in October.”
Alight Solutions
On average, 0.009% of 401k balances were traded daily, according to Illinois-based Alight Solutions, and five of 21 days favored fixed-income funds.
Trading inflows mainly went to stable value, bond, and money market funds, it added, while outflows were primarily from company stock, large U.S. equity, and small U.S. equity funds.
After reflecting on market movements and trading activity, average asset allocation in equities increased from 69.8% in September to 70.5% in October.
New contributions to equities decreased from 69.4% in September to 69.2% in October.
It follows a particular heavy trading month in August, when 401k participants moved money from equities to fixed income on nearly all trading days, 20 of 22, in the month of August, according to the index.
The firm considers a “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401k balances within the Alight Solutions 401(k) 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 two times the average daily net activity of the preceding 12 months.
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.
