Investors may have faced tumultuous and uncertain economic times, but they remained calm and saw a year-over-year increase in their 401k accounts.
Charles Schwab released its SDBA Indicators Report, an ongoing benchmark for retirement plan participant investment activity, which showed that within self-directed brokerage accounts (SDBAs) the average balance was $341,068 in the third quarter, a 12.8% increase over the same period last year. Despite the good news, the average account balance was down 2% from the second quarter of 2021.
SDBAs are brokerage accounts within retirement plans, including 401k plans 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, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
According to Schwab, the latest data shows steady and unruffled investing behavior among participants, with trading volumes similar to trades in 2020. And while balances were down slightly compared to the second quarter, participant holdings remained similar, with a slight increase in cash holdings. In the most recent report, the highest allocation of participant assets was in equities (36%), mutual funds were second at 30%, followed by ETFs(20%), cash (13%) and fixed income (1%).
Key trends emerge, especially in advised accounts
Financial advisors should also take note that their advice is working. Notably, advised accounts held much higher average account balances compared to non-advised accounts: $542,365 vs. $294,215. Gen X had the most advised accounts at approximately 49%, followed by Baby Boomers (35%) and Millennials (14%).
Schwab’s data, which is collected from approximately 176,000 retirement plan participants with balances ranging from $5,000 to $10 million, also revealed additional investing trends:
- Large-cap funds had the largest allocation at approximately 34% of all mutual fund allocations, followed by taxable bond (19%) and international (15%) funds.
- The largest equity sector holding was Information Technology at 29.8%, up slightly from 29.3% last quarter, with Apple as the top overall equity holding (10.6%). Other familiar names rounded out the top five: Tesla (6.9%), Amazon (4.9%), Microsoft (2.9%) and NVIDIA (2%).
- Investors continued to allocate the most dollars to U.S. equity (50%), followed by sector ETFs (14%), U.S. fixed income (14%) and international equity (13%).
Other key findings include:
- Gen X made up approximately 45% of SDBA participants, followed by Baby Boomers (31%) and Millennials (18%).
- Baby Boomers had the highest SDBA balances at an average of $526,193, followed by Gen X at $301,686 and Millennials at $101,670.
- On average, participants held 12.4 positions in their SDBAs at the end of Q3 2021, which was consistent with Q2 2021.
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.