How Did 401(k) Participants Respond to January Markets?

Participant trading picked up in January right where it left off in December.

The New Year started with light trading activity for investors in defined contribution plans, according to the Aon Hewitt 401(k) Index, with no days of above-normal trading in January. On average, 0.017% of balances traded each day, matching December’s pace.

It turned out to be a sharp contrast from November, when on average, 0.035% of balances traded each day – the highest level since January 2013. In the days leading up to the Nov. 8 election, trading activity was above normal, with trades moving money from equities to fixed income.

For 13 of the 20 trading days in January, participants favored equities over fixed income funds in their trades. Large U.S. equity funds were the big draw in the month, garnering 39% of the inflows tracked by the index, which includes the trading activities of nearly 1.3 million participants, representing nearly $160 billion in collective assets. International funds drew 23% of the inflows, and mid-U.S. equity funds collected 13% of the month’s transfers.

Those transfers came primarily from stable value funds (40%), company stock funds (30%) and bond funds (15%).

As for new money, target-date funds were the recipient of a quarter (24%) of contributions, some $560 million, followed by large U.S. equity funds (18%) and international funds (8%).

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