The average self-directed 401k account balance at the end of 2021 rose 6.4% year-over-year to $352,764 according to Charles Schwab’s SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs).
That’s a 3.4% increase from Q3 2021, despite November beginning with fears over new COVID variants, inflation, and Fed asset tapering. The fourth quarter 2021 SDBA Indicators Report reflects continued resilience among investors through a historically volatile year. Balances ultimately ended the quarter higher as investor concerns subsided and the economy proved stable overall.
SDBAs are brokerage accounts within retirement plans, including 401ks and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
Participant holdings remained similar to the fourth quarter of 2020, with a slight decrease in cash holdings and slight increases in equities and ETFs. The majority of participant assets were held in equities (37% in 2021 vs 35% in 2020). Mutual funds were the second largest holding at 30% (vs 31% in 2020), followed by ETFs (21% vs 18% in 2020), cash (11% vs 14% in 2020), and fixed income (1% vs 2% in 2020).
Allocation trends
The data also reveals specific asset class and sector holdings within each investment category:
- Mutual funds: Large-cap funds had the largest allocation at approximately 35.1% of all mutual fund allocations, higher than last year (31.9%). They were followed by taxable bond (18.5%) and international (14.9%) funds.
- Equities: The largest equity sector holding was Information Technology at 31.8%, up slightly from 29.8% last quarter and similar to last year. The top five equity holdings remained the same as last quarter. Apple was the top overall equity holding, comprising 11.9% of the equity allocation of portfolios, followed by Tesla (8.5%), Amazon (4.5%), Microsoft (3.2%) and NVIDIA (2.7%).
- ETFs: Among ETFs, investors continued to allocate the most dollars to U.S. equity (51.5%), followed by sector ETFs (13.4%), U.S. fixed income (12.8%) and international equity (12.4%). Year over year, investors increased U.S. equity allocations by 2.3 percentage points and decreased fixed income allocations by 2.2 percentage points.
More highlights
- Advised accounts held higher average account balances compared to non-advised accounts: $558,470 vs. $304,164.
- Gen X had the most advised accounts at 48.9%, followed by Baby Boomers (33.7%) and Millennials (14.5%).
- Gen X made up approximately 45.2% of SDBA participants, followed by Baby Boomers (30.7%) and Millennials (18.5%).
- Baby Boomers had the highest SDBA balances at an average of $548,658, followed by Gen X at $315,574 and Millennials at $106,408.
- Quarterly trading volumes were slightly lower than one year ago, down to 13.3 trades from 13.9, and similar to last quarter (13.1).
- On average, participants held 12.5 positions in their SDBAs at the end of Q4 2021, consistent with Q3 2021 and higher than Q4 2020 (11.4).
The SDBA Indicators Report includes data collected from approximately 178,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria. Data contained in the quarterly report can be found here, along with prior reports.
SEE ALSO:
• Why 401k Plan Sponsors Increasingly Eye Self-Directed Brokerage Accounts
• 3Q 2021: Self-Directed 401k Investors Stay Steady, See Balances Increase
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
