A strong year on Wall Street saw 401k investors making small but steady trades from equities to fixed income, according to the Alight Solutions 401(k) Index.
Although 2019 had only 25 days of above-normal daily transfer activity—much lower than 2018’s total of 46 days—the net trading activity was the highest Alight has seen since 2013, at 2.29%.
All told, 86% of the trading days saw net trading activity move from equities to fixed income, the Illinois-based Alight found.
“In 2019, 401k investors largely took a more thoughtful and less reactionary approach to investing than in past years with an overwhelming trend of small trades away from equities to fixed-income funds,” Rob Austin, the company’s Head of Research, said in a statement. “This activity seems to suggest that people were rebalancing their portfolios, not making drastic changes to their investment mix.”
Flight (or rather stroll) to fixed income
More specifically, asset classes with the most trading inflows in 2019 were bond funds (55%), stable value funds (27%) and money market funds (13%).
Asset classes with most trading outflows in 2019 were large U.S. equity funds (49%), company stock (34%) and small U.S. equity funds (8%).
For context, 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.
Target-date funds also include the amounts in target risk funds for companies that do not have target-date 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.
