401(k) Balances Reflect Volatile Period for Markets

According to a Charles Schwab report, average balances across all self-directed brokerage accounts finished 15% lower than the first quarter.

By DJ Shaw

According to Charles Schwab’s SDBA Indicators Report, an benchmark on retirement plan participant investment activity within self-directed brokerage accounts, the average account balance across all participant accounts finished at $283,485 for the second quarter ending June 30, a 19% decrease year-over-year and a 15% decrease from the first quarter of 2022.

SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds (ETFs), mutual funds and other securities that are not part of their retirement plan’s core investment offerings.

The SDBA Indicators reflected another volatile period for markets prior to the July/August market recovery. In the second quarter, the S&P 500 hit its lowest level since December 2020 as still-high inflation, sharp increases in interest rates, rising recession risks, and ongoing geopolitical unrest pressured stocks and other assets. Against this backdrop, equity allocations decreased to 33% of assets, down from 37% last year and 36% in the first quarter. Cash allocations increased to 15% of assets, up from 12% last year and 13% in the first quarter.

Overall, participant holdings remained similar to the previous quarter, the report says. Equities remained the largest holding, with the largest sector being information technology at 29%. The top equity holdings were Apple (12%), Tesla (8%), Amazon (4%) Microsoft (3%) and NVIDIA (2%).

Mutual funds were the second-largest holding at 28.8%, with the largest allocation going to large-cap stock funds at 33.9%. They were followed by taxable bond (20%) and international (14%) funds, the report says. ETFs held 21% of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (51%), followed by fixed income (14%), international equity (13%) and sector (12%) ETFs.

Advised accounts held higher average account balances compared to non-advised accounts, $460,376 vs. $240,974, the report says. Gen X had the most advised accounts at 50%, followed by Baby Boomers (32%) and Millennials (15%).

Gen X made up approximately 46% of SDBA participants, followed by Baby Boomers (30%) and Millennials (19%), the report says. Baby Boomers had the highest SDBA balances at an average of $452,381, followed by Gen X at $252,477 and Millennials at $85,121.

Trading volumes were lower at an average of 11 trades per account compared to 14 last quarter and a year ago, the report says. On average, participants held 13 positions in their SDBAs at the end of the second quarter, consistent with the previous quarter and similar to last year.

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