Maybe it was the aftermath of the presidential election; maybe it was the fact that more 401k plan sponsors use target date funds; or maybe investors are getting the importance of staying invested.
Whatever the reason, February was a light month for trading activity among investors in 401k defined contribution plans, according to the Aon Hewitt 401(k) Index. On average, 0.016 percent of balances traded each day—the lowest level since August 2016. February had no days of above-normal trading.
The benefits giant defines a “normal” level of relative 401 k plan transfer activity as when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Aon Hewitt 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.
After combining contributions, trades, and market activity in investors’ accounts, the percentage of 401k plan balances in equities was 66.4 percent at the end of February, up from 65.9 percent at the end of January. When investors made new contributions, equities were favored, with 66.7 percent of contributions going to equities, up from 66.1 percent in January.
Overall, capital markets continued to see positive gains in February, led by the ongoing rally of U.S. equities. U.S. Large-Cap equities increased 4 percent during the month, bringing returns to nearly 6 percent for the year. U.S. Small-Cap equities and international equities each increased nearly 2 percent during the month. U.S. bonds increased 0.7 percent during February.
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.
