Self-Directed 401(k)s Enjoy Strong Q3 Growth: Schwab
The average self-directed brokerage account balance at Schwab finished Q3 at $383,087, up 5.7% from the second quarter and 10.3% year-over-year, as U.S. financial markets posted strong gains with all major indices reaching record highs during the quarter.
This according to the recently released Q3 SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts from Charles Schwab.
SDBAs are brokerage accounts within workplace retirement plans, including 401(k)s 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 (ETFs), mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
In Q3, the Schwab report noted that U.S. financial markets posted strong gains with all major indices reaching record highs following a rally led by robust corporate earnings, continued enthusiasm around artificial intelligence, and the Federal Reserve’s anticipated interest rate cut in September.
The report also showed the largest equity sector holding was Information Technology at 38.6%, with NVIDIA maintaining the top position as the largest individual stock holding followed by Apple, Tesla, Amazon, and Microsoft.
ETFs held 28.6% of participant assets. Investors allocated the most dollars to US equity (49.5%), followed by US fixed income (12.5%) and international equity (12%).
Mutual funds held steady at 25.4%, with the largest allocation going to large-cap stock funds at 34.4%, followed by money market funds at 17.4% and taxable bond funds at 14%.
Cash and equivalents held 6.8% of participant assets while 3.5% of assets were held in fixed income.
Trading volumes were up slightly from last quarter, at an average of 16.8 trades per account (compared to 13 trades a year ago) and participants held 11.9 positions in their PCRA.
Advised accounts held higher average account balances compared to non-advised accounts, $580,339 vs $338,938—both reflecting an increase from last quarter. Gen X again had the most advised accounts (52.5%), followed by Millennials (25.6%) and Baby Boomers (20%).
Gen X made up 46.9% of SDBA participants, followed by Millennials (27.7%) and Baby Boomers (22%). Boomers again had the highest account balances at $633,644, followed by Gen X at $407,959 and Millennials with $154,042.
On average, participants held 11.9 positions in their PCRA, which has been relatively consistent over the last year.
The SDBA Indicators Report includes data collected from approximately 322,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account.
SEE ALSO:
• SDBA Balances Rebound for Q2
• Schwab to Match Treasury’s Trump Account Contribution for Its Employees
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.