While 401k plan participants have generally been better about staying the course and remaining invested during times of market turmoil, the situation involving Russia and Ukraine appears to have them rattled more than usual.
“Tuesday saw an astounding 7.5 times normal levels of 401k trading.”
Over the past few days, Alight Solutions has seen 401k investors react, with the past three days of trading showing higher than normal trading activities. As Alight has seen during other periods of heightened volatility, 401k investors moved away from equities to fixed income.
Given Thursday’s market reaction to the situation unfolding in Ukraine, the Illinois-based recordkeeper will be carefully monitoring trading activity over the coming days.
Last Friday, in the runup to the conflict, Alight saw 1.6 times normal levels of trading.
While the markets were closed on Monday for the Presidents’ Day Holiday, Tuesday saw an astounding 7.5 times normal levels of 401k trading, and Wednesday revealed 2.87 times normal levels.
Alight tracks the 401k-trading activity of over 2 million people with more than $200 billion in collective assets and reports detailed monthly and quarterly 401(k) trading volume, asset flows, and market activity.
For perspective
According to Alight, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Alight Solutions 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.
Target-date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.
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.
