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401(k) Investors Stay-the-Course for February

Industry Trends and Research

Following a slow start after 2018’s year-end market volatility, 401(k) investor trading activity again remained calm for February, reflecting a mostly positive performance for investors.

According to the Alight Solutions 401(k) Index, February included only three trading days of above-normal trading activity. On average, a mere 0.016% of 401(k) balances were traded daily for the month, according to the report. 

A “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percentage of total 401(k) balances within the firm’s 401(k) Index equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

And similar to January’s results, when participants made trades, they overwhelmingly favored fixed income funds over equities for 17 of 19 trading days. Trading inflows mainly went to bond (45% at $168 million), stable value (30% at $112 million) and money market funds (7% at $26 million), while outflows were primarily from large U.S. equity funds (58% at $217 million), company stock (36% at $134 million) and international funds (5% at $18 million).

After reflecting market movements and trading activity, average asset allocation in equities increased to 67.9% at the end of February from 67.6% at the end of January. Meanwhile, new contributions in equities remained unchanged at 67.7% in February, Alight notes.

Asset classes with the most contributions in February included target date funds (44% at $737 million) and large U.S. equity funds (19% at $314 million), followed by company stock (7% at $116 million).

Alight’s data further shows that large U.S. equities (represented by S&P 500 Index) gained 3.2% and small U.S. equities (represented by the Russell 2000 Index) increased 5.2%. International equities (represented by the MSCI ACWI ex-US Index) rose 2%, while the U.S. bond market (represented by the Bloomberg Barclays U.S. Aggregate Index) lost -0.1%.