401(k) Trading Slows as Investors Remain Cautious

Alight Solutions has published the April update of its 401(k) Index, noting that despite equity markets posting their worst month in over two years, 401(k) investors were not making reactionary trades.

There were no above-normal trading days in April, Alight says. However, net transfers were up slightly compared to March (.10% vs .09%) as investors moved money out of equities and into fixed income.

On average, 0.011% of 401(k) balances were traded daily, compared to an average of 0.014% last month. Investors favored moving assets into fixed-income funds during 15 out of 20 trading days. Trading inflows overwhelmingly went to stable value, specialty/sector and money market funds, while outflows were primarily from target-date, company stock and small U.S. equity funds, Alight says.

After reflecting market movements and trading activity, average asset allocation in equities decreased from 69.9% in March to 69.1% in April, Alight says. New contributions to equities decreased from 69.7% in March to 69.5% in April.

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.