It’s not exactly a shock that self-directed DC accounts struggled in the fourth quarter correction, but a new Schwab report sheds light on the outcome overall.
Schwab’s SDBA Indicators Report, a benchmark of retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the Q4 correction caused the average SDBA balance to fall $246,153, a decline of 10.6% from Q3 2018 and 6.3% year-over-year.
SDBAs are brokerage accounts within retirement plans, including 401(k) 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.
According to the Schwab data, mutual funds continued to hold the highest percentage of participant assets at approximately 37%, the same as Q4 2017.
Allocations to equities remained at 28%, and exchange-traded funds (17%), cash (15%), and fixed income (3%) rounded out participants’ portfolios. Despite the high market volatility experienced in the fourth quarter, participants averaged just 2.2 trades per month.
Allocation Trends
The data also reveals specific sector holdings within each investment category:
- With regard to mutual funds, large-cap funds represented approximately 28% of all allocations, followed by taxable bond (21%), international (16%), hybrid (12%) and small-cap (12%) funds.
- Apple (AAPL) was the top overall equity holding, representing approximately 9% of the equity allocation of portfolios. Amazon (AMZN) was the second-largest equity allocation, representing approximately 6.5% of portfolios, an increase of 3% since Q4 2017. Berkshire Hathaway (BRKA) (3%), Microsoft (MSFT) (2%) and Facebook (FB) (1.75%) rounded out the top five equity holdings.
- Among exchange-traded funds, investors allocated the most dollars to U.S. equity (48%), international equity (16%) and U.S. fixed income (15%).
Report Highlights
Additional findings include:
- On average, participants held approximately 10 positions in their SDBA.
- Baby Boomers and Gen X made up approximately 41% of SDBA participants each, followed by Millennials at 12%.
- The average age of an SDBA participant was 51. Seventy-six percent of participants were male and 24% were female.
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.