A 3.3% year-over-year increase and a 13% increase from the end of the first quarter of 2020? Not bad for self-directed 401k balances considering the havoc wrought by the pandemic in the first half of 2020.
According to Charles Schwab’s latest SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance across all participant accounts finished Q2 2020 at $285,616, reflecting that 3.3% increase from 2019 and 13% increase from Q1 2020.
The average SDBA balance finished Q1 2020 at $252,675, down 6% year-over-year and down 14% from Q4 2019 according to the previous report. The average balance across all SDBA participant accounts finished 2019 at $294,105.
SDBAs, brokerage accounts within retirement plans including 401ks, are used by some participants to invest retirement savings in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
The second quarter SDBA Indicators Report also showed trading volumes were slightly higher than the first quarter, at an average of 14 trades per account up from 13.4 trades in Q1 2020.
Asset allocation remained similar to Q1, with the exception of an increase in equities holdings from 27% in Q1 2020 to 30% in Q2. Mutual funds continue to hold a majority of participant assets (33%), followed by equities (30%), ETFs (18%), cash (17%), and fixed income (2%).
Allocation trends
The data also reveals specific sector holdings within each investment category:
- Mutual funds: Large-cap funds had the largest allocation at approximately 31% of all mutual fund allocations, followed by taxable bond (21%) and international (14%) funds.
- Equities: Information technology remained the largest equity sector holding at 30%, up from 29% in Q1 2020. Apple continues to be the top overall equity holding, comprising 11% of the equity allocation of portfolios. The other equity holdings in the top five include Amazon (7.1%), Microsoft (3.5%), Tesla (3.0%), and Berkshire Hathaway (1.9%).
- ETFs: Among ETFs, investors allocated the most dollars to U.S. equity (47%), followed by U.S. fixed income (18%), international equity (12%) and sector ETFs (12%).
Highlights by generation
- On average, participants held 10.5 positions in their SDBAs at the end of Q2 2020, which has remained consistent both year-over-year and quarter-over-quarter. Baby Boomers held more positions in their SDBA than other generations (11.9 vs. Gen X: 10.3, Millennials: 7.9).
- Gen X made up approximately 43% of SDBA participants, followed by Baby Boomers (36%) and Millennials (15%).
- Baby Boomers had the highest SDBA balances at an average of $418,743, followed by Gen X at $231,798 and Millennials at $76,282.
- Gen X had the most advised accounts at 46%, followed by Baby Boomers (40%) and Millennials (11%).
- Mobile trades were most popular among Millennials (33%), followed by Gen X (28%) and Baby Boomers (20%).
The SDBA Indicators Report includes data collected from approximately 152,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account.
Data contained in the quarterly report can be found here, along with prior reports.
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.
