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Self-Directed 401(k) Balances Rally Around Strong Market Performance

Industry Trends and Research

New data shows that the average balances for self-directed brokerage accounts bounced back from the sharp losses seen at the end of 2018.  

According to Charles Schwab’s latest SDBA Indicators Report, which analyzes investment trends from 137,000 retirement plan participants who currently invest through self-directed brokerage accounts, the average SDBA balance jumped to $267,609 at the end of the first quarter for 2019 – an increase of 8.7% from the fourth quarter of 2018. 

As compared to a year ago, the average account balance of $267,609 for all participants in the Schwab Personal Choice Retirement Account (PCRA) was up by 0.91% from $265,195. 

Investors also largely stayed put, according to the data. Trading volumes were down slightly from last quarter at an average of 6.5 trades per account, while participants made the most trades in their equity holdings, followed by mutual funds and ETFs. In addition, participants on average held 9.8 positions in their PCRA, which was very similar to last year and the same as last quarter, the report shows. 

Mutual funds continued to hold the highest percentage of participant assets at nearly 37%, the same as the fourth quarter of 2018. Equities remained the second-largest holding at 29%, followed by exchange-traded funds (17%), cash (13%) and fixed income (3%).  

Allocation Trends

Regarding mutual funds, large-cap funds represented 29% of all allocations, followed by taxable bond (20%), international (16%), hybrid (12%) and small-cap (12%) funds.

Apple remained the top overall equity holding, representing 9.1% of the equity allocation of all portfolios, with Amazon representing the second-largest allocation at 6.4% of portfolios. Berkshire Hathaway (2.5%), Microsoft (2.1%) and Facebook (1.8%) rounded out the top five equity holdings.

Among exchange-traded funds, investors allocated the most dollars to U.S. equity (48%), international equity (16%), U.S. fixed income (15%) and sector ETFs (11%).  

Not surprisingly, Baby Boomers ended the quarter with the largest balance of all generations, registering at $374,622, up from $342,810 in the fourth quarter of 2018, followed by Gen Xers ($202,481) and Millennials ($65,928).

Advised vs. Non-Advised 

Notably, those with advised accounts had nearly double the balances of those without. The average participant balance for advised accounts was up to $436,593 from $402,866 last quarter, while non-advised accounts were at $227,334.

Baby Boomers also had the most advised accounts at 44%, but Gen X was not far behind at 43.2%, while only 9.2% of the Millennials chose to use an advisor. Those with advised accounts also had more average trades – 10.3 total versus 5.6 for non-advised accounts. Overall, the trading volume remained very similar to last quarter and to last year, according to Schwab’s data. Moreover, those participants who used advisors demonstrated a more diversified asset allocation mix and had a lower concentration of assets in particular securities.