401(k) Index Underscores Investor Jitters

Facing some jarring geopolitical events, 401(k) investors reacted with above-normal trading activity during February.

By DJ Shaw

Alight Solutions has published February updates from its 401(k) Index, noting that it was another busy trading month for 401(k) investors, who traded an average of 0.02% of balances daily, compared to 0.017% last month.

As international political events drove Wall Street lower, Alight says 401(k) investors reacted with above-normal trading activity. Investors favored moving assets into fixed income funds during 14 out of 19 trading days. Total transfers as a percentage of starting balance rose to 0.24%, compared to 0.15% in January.

According to the index, 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 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.

The index shows trading inflows mainly went to stable value, bond and money market funds. Outflows were primarily from target-date funds, large U.S. equity funds and mid-cap U.S. equity funds.

Alight also found that, after reflecting market movements and trading activity, the average asset allocation in equities decreased from 70.0% in January to 69.5% in February. Additionally, new contributions to equities decreased from 70.1% in January to 69.5% in February.

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