A strong stock market final quarter of 2023 led to average self-directed brokerage account balances increasing to $310,400 in Q4 2023, up 10.8% year-over-year and 7.9% from Q3 2023.
That’s according to the latest findings from Schwab’s Q4 2023 SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within SDBAs.
Trading volumes averaged 9.7 trades per account compared to 7.8 trades per account in the third quarter and similar to trading volumes from the fourth quarter of 2022.
Today’s report marks the first full quarter since the integration of TD Ameritrade self-directed brokerage account retirement plans and plan participants on Sept. 1, 2023. The integration may impact some of the numbers within the quarterly report such as average balances and the number of participants.
SDBAs are brokerage accounts within 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.
Advised accounts continue to hold much higher average account balances compared to non-advised accounts, $502,424 vs. $270,803.
Gen X had the most advised accounts (52%), followed by Baby Boomers (26%) and Millennials (19%). Gen X made up approximately 46% of SDBA participants, followed by Boomers (27%) and Millennials (21%).
Boomers had the highest SDBA balances at an average of $502,354, followed by Gen X at $296,812 and Millennials at $109,298.
On average, participants held 11.8 positions in their SDBAs at the end of Q4 2023, slightly lower than Q4 2022 and the same as Q3 2023.
Allocation trends
Overall, participant holdings in the fourth quarter were similar to the third quarter, with the so-called “Magnificent Seven”— Apple, Tesla, Amazon, Nvidia, Microsoft, Alphabet, and Meta Platforms—dominating the top spots interrupted only by Berkshire Hathaway in the sixth spot. The Magnificent Seven collectively make up about 29% of the S&P 500.
• Equities: Equities remained the largest holding at 34.5%. The largest equity sector holding was Information Technology at 31.6%. The top equity holdings remained Apple (12.0%), Tesla (7.8%), Amazon (4.8%), Nvidia (4.7%) and Microsoft (3.9%). Berkshire Hathaway (2%) was next, followed by Alphabet (1.68%) and Meta Platforms (1.52%).
• Mutual funds: Mutual funds were again the second largest holding at 28.4%, with the largest allocation going to large-cap stock funds at 33%, followed by taxable bond funds (15.1%) and money market funds (14.6%).
• ETFs: Exchange-Traded Funds held 22.8% of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (52.6%), followed by fixed income (14.1%), international equity (12.5%) and sector (10.0%) ETFs.
• Cash and Fixed Income: Cash & equivalents held 8.9% of participant assets while 5.4% of assets were held in fixed income.
The SDBA Indicators Report includes data collected from approximately 284,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.
SEE ALSO:
• Self-Directed 401(k)s Fall 9.2% From Q2 2023
• Self-Directed 401(k)s See 6.6% Gain in Q1 2023
• 401(k) Balances (and Millionaires) Dip Slightly in Q3: Fidelity
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.
