The dog days of August led to light 401k trading by plan participants.
The Alight 401(k) Index found only two above-normal trading days—the first since mid-June—and the net trades as a percent of balance (0.07%) reflected the second lowest month in the more than 20-year history of the index.
This was mainly because traders favored equities as stocks gained at the beginning of the month but then preferred fixed income funds as Wall Street sold in the second half of the month, according to the Illinois-based recordkeeper. Overall, bond funds topped inflows (50%), while most outflows were from target date funds (37%).
On average, 0.009% of 401(k) balances traded daily, and 13 of 23 days favored equity funds. Trading inflows mainly went to bond, large U.S. equity, and international equity funds. Outflows were primarily from target date, stable value, and mid-U.S. equity funds.
After reflecting market movements and trading activity, average asset allocation in equities decreased from 68.6% in July to 68.3% in August. New contributions to equities remained at 68.5% from July through August.
A “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) 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 2 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.
