A falloff in Wall Street volatility brought a corresponding slowdown to trading activity among 401k investors, with an emphasis on fixed income funds, according to the Alight Solutions 401(k) Index.
With three trading days of above-normal trading activity and one day of low activity, January 2019 was the slowest start to the year in the more than 20-year history of the Index.
The average daily activity for the month was 0.016 percent—lower than the 0.024 percent in January 2018 and the trailing 5-year average of 0.025 percent.
The month had 17 of 21 days favoring fixed income funds and, on average, 0.016 percent of 401k balances were traded daily.
More specifically, trading inflows mainly went to bond, small U.S. equity, and stable value funds while outflows were primarily from large U.S. equity, target date funds, and company stock.
January overall provided relief for investors from the last year’s difficult fourth quarter, as Alight notes.
The U.S. bond market gained 1.1 percent. Large U.S. equities rose 8 percent and small U.S. equities gained 11.3 percent. International equities were up 7.6 percent.
What does it mean?
Alight defines 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.
Their target date fund analysis also includes the amounts in target risk funds. The amount in the target risk funds is less than 10 percent 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.