Keep calm and carry on—401(k) participants appear to be getting the message.
After a turbulent first quarter, 401(k) investors had a slower trading month in April, according to the Alight Solutions 401(k) Index. There were three days of above-normal trading activity, all within the first week of the month.
Additionally, reversing a trend from March, trading favored equity funds over fixed income.
On average, 0.023% of 401(k) balances were traded daily, and 12 of 21 days favored equity funds.
Trading inflows mainly went to bond funds, self-directed brokerage windows, and money market funds for the month. Outflows were primarily from target date, company stock and large U.S. equity funds.
Reflecting market movements and trading activity, average asset allocation in equities increased from 63.1% in March to 64.7% in April, and new contributions to equities decreased slightly from 67.3% in March to 67.2% in April.
Staying positive
All indices delivered positive returns, following the first quarter’s decline.
Small U.S. equities rose 13.7%, large U.S. equities were up 12.8% and international equities gained 7.6%. U.S. bonds were also up by 1.8%.
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 two 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.
