According to Charles Schwab’s 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 2019 at $294,105, a 19% increase year-over-year and a 6% increase from Q3 2019.
The average balance in the third quarter of 2019 was $276,929, nearly identical to the $276,547 from the previous quarter and 1% above the average balance from the third quarter of 2018 ($275,362), according to Schwab’s previous SDBA Indicators Report.
SDBAs are brokerage accounts within retirement plans, including 401ks and other types of retirement plans, which participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
The SDBA Indicators Report includes data collected from approximately 142,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account (PCRA). Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.
The report tracks a wide variety of investment activity and profile information on PCRA participants, ranging from asset allocation trends and asset flow in various equity, exchange-traded fund and mutual fund categories, to age trends and trading activity. The SDBA Indicators Report provides insight into PCRA users’ perceptions of the markets and the investment decisions they make.
The latest report found asset allocation remained largely the same, with participants finishing the year where they started it and mutual funds holding most participant assets (37%), followed by equities (29%), ETFs (19%), cash (12%) and fixed income (3%). Fourth quarter trading volumes were slightly higher compared to the previous quarter, at an average of 7.2 trades per account up from 6.7 in the third quarter.
Allocation trends
The data also reveals specific sector holdings within each investment category:
- Mutual funds: Large-cap funds represented approximately 30% of all mutual fund allocations, followed by taxable bond (20%) and international (16%) funds.
- Equities: Information technology dominated equity sector holdings (27%). Apple (AAPL) continues to be the top overall equity holding, increasing quarter-over-quarter from approximately 9.5% of the equity allocation of portfolios to 11%. The other equity holdings in the top five include Amazon (AMZN) (5.5%) followed by Microsoft (MSFT) (2.6%), Berkshire Hathaway (BRKA) (2.4%), and Facebook (FB) (1.6%).
- ETFs: ETFs experienced the largest net asset flows in Q4. Among ETFs, investors allocated the most dollars to U.S. equity (49.7%), with broad U.S. market ETFs in the top three holdings: Vanguard Total Stock Market ETF (4.2%), the SPDR S&P 500 ETF (4.2%) and the Schwab U.S. Broad Market ETF (3.4%). U.S. fixed income (15.2%), international equity (14.7%) and sector ETFs (10.5%) rounded out the allocations in the ETF category.
More report highlights
Additional findings include:
- Participants averaged approximately 10 positions in their SDBAs at the end of Q4 2019, which has remained steady both year-over-year and quarter-over-quarter.
- Gen X made up approximately 42% of SDBA participants, followed Boomers (38%) and Millennials (13%).
- The average age of an SDBA participant was 51. Seventy-six percent of participants were male and 24% were female.
Data contained in the quarterly report is from the fourth quarter of 2019, and 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.
