“Amid a volatile but rising stock market, 401k investors were light traders and content to watch their balances rise in March,” the Alight Solutions 401k Index reported Tuesday. There were no days of above-normal activity during the month.
Average net trading activity was 0.015% of 401k balances, down from 0.016% in February. This is in sharp contrast to the 0.079% seen last March during the stock selloff at the onset of the COVID-19 pandemic.
Four days favored fixed-income funds and 19 days favored equity funds. Trading inflows mainly went to small U.S. equities, target-date funds and large U.S. equities Outflows were primarily from bond funds, stable value, and company stock.
After reflecting market movements and trading activity, average asset allocation in equities increased from 68.3% in February to 69.0% in March. New contributions to equities increased from 68.6% in February to 69.8% in March.
Q1 trading results
The first quarter of 2021 also saw light trading in 401k plans, Alight added. The only day of above-normal activity occurred on January 6 when investors sold large U.S. equities amid events at the U.S. Capitol.
Total transfers as a percent of balances in Q1 2021 were 0.46%—the lowest quarterly level since Q3 2018. Last year, 1.59% of balances were traded as stocks tumbled in the first quarter.
Seventy percent of the trading days saw net trading money flowing from fixed-income funds to equities.
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 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 two 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.
