It’s like they’ve never heard of possible Fed action. While September was another light month of trading for 401(k) investors, signaling an understanding of “stay the course,” participants who did make trades favored fixed income.
The Aon Hewitt 401(k) Index saw 0.14 percent of total balances traded during the month and only one day of above-normal trading activity.
A “normal” level of relative transfer activity is when daily movement of participants’ balances equals between 0.3 times and 1.5 times the daily average of the preceding 12 months.
After combining contributions, trades, and market activity in participants’ accounts, the percentage in equities remained unchanged from August. However, new contributions continue to favor stocks, with 66 percent of employee contributions investing in equities—a slight increase from August.
The third quarter overall saw “ebbs and flows” in trading activity for 401(k) investors, according to Aon Hewitt. The quarter began with high trading activity driven by market volatility in the wake of the Brexit vote. August was one of the lightest trading months on record, while September saw more of a return to normal activity.
Trades in the third quarter generally favored fixed income over equities with stable value, bond, and money market funds receiving the majority of the inflows.
Large U.S. equity funds, company stock, and small U.S. equity funds having the most outflows.
September was a relatively good month for investors as U.S. Small-Cap equities and International equities posted positive returns.
U.S. Large-Cap equities returns were flat. U.S. bonds posted slightly negative returns. Third quarter returns for nearly all indices were strong.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and 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. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.
