Just when we think 401k participants “get it” they go and do stuff like this. Market volatility in August spurred higher than normal 401k trading activity, with net trading activity for the month at its highest level in 2019.
The Alight Solutions 401(k) Index saw 0.24% of balances traded with six above-normal days, the highest monthly total since December 2018.
It was the 19th month in a row that net trades have flowed from equities to fixed income, and 16 of 22 days favored fixed-income funds.
Trading inflows mainly went to bond, stable value and money market funds, while outflows were primarily from large U.S. equity, target date and mid-U.S. equity funds.
After reflecting market movements and trading activity, average asset allocation in equities decreased from 67.7% in July to 67.5% in August
New contributions to equities decreased from 67.7% in July to 67.6% in August.
August market observations
Equities fell during the month with small U.S. equities losing 4.9%, large U.S. equities falling 1.6% and international equities dropping 3.1%.
Fixed-income investors fared better with U.S. bonds gaining 2.6%.
A “normal” level of 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 is when the net daily movement exceeds two times the average daily net activity.
A “moderate” relative transfer activity 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.
