The Alight Solutions 401(k) Index shows the fourth quarter of 2018 brought 17 days with above-normal trading volumes within 401(k) plans; according to the firm, these days mostly concentrated around days when the stock market lost ground.
The firm notes that, since the inception of this index in 1997, there have been only seven quarters with more than 17 days of above-normal trading activity. Participants in Q4 2018 completed net transfers amounting to 0.55% of starting balances, which is the highest percentage since the third quarter of 2016. During the quarter, more than two-thirds of trading days showed net trading movement from equities to fixed income—representing ill-timed flights to safety amid stock market price dips.
Indeed, according to the index, stable value funds received 70% of the quarterly inflows, while money market funds received 21% and bond funds received 7%. On the flip side, asset classes with the most trading outflows included target-date funds (54%), large U.S. equity funds and (16%) and mid-sized U.S. equity funds (13%).
Full Index Results for 2018
Alight Solutions has also published a full year-end update of the 401(k) Index, calling 2018 “an interesting year for trading activity among retirement plan investors.”
“On the one hand, participants were very active during the year, with 46 days of above-normal daily transfer activity—the highest number of above-normal days in the last five years,” the firm says. “This is much higher than the 13 days of above-normal trading in 2017. On the other hand, net trades in 2018 amounted to only 1.42% of total plan balances, making 2018 a record low year for trading activity in the over 20-year history of the index.”
According to Alight Solutions, the discrepancy can be attributed to the fact that many of the high trading activity days were concentrated around the beginning and end of the year—with trades more or less moving in similar volumes in opposite directions.
“Investors started the year in January with a rush to equities,” the firm says. “The first seven trading days of the year and 18 of the first 28 trading days were elevated with nearly universal movement from fixed-income investments to equity funds. However, investors reversed this trend in December when Wall Street plummeted.”
After reflecting contributions, trades and market activity, 401(k) investors ended 2018 with 66.6% in equities, down from 68.8% at the beginning of the year.