SDBA Asset Allocation Levels Stagnant in 2nd Quarter

Overall asset allocation remained neutral in the second quarter of 2004; however, 44% of asset flows in the second quarter were accounted for by mutual funds, down from 62% in the previous quarter. Equity-asset flows moved upward from a first-quarter reading of 33% to 39% in the second quarter. 

Schwab representatives attributed this leveling off in part because of election year uncertainty, as well as geo-political turmoil. “In an election year, it’s understandable that investors are cautious,” said Mark Coffrini, Schwab Corporate Services vice president, in a press release.  “But by mid-year we usually see a return to normal activity and the slowdown in the second-quarter indicates that investors are staying on the sidelines and waiting for geo-political issues to shake out and for the presidential election to be over.”

The survey also quantified the trading patterns of different generations. As a whole, older people – those over 50 – held a higher level of mutual funds and less cash then younger people. Fixed-income asset holdings also increase with age. Those over 50 allocated an average of 8% of their portfolio to fixed-income instruments, whereas only 1% of assets are in these vehicles for those aged 20 to 39.

Trading also increases with age, with those over 50 making an average of four trades per quarter. Those aged 40 to 49 trade only 3.4 times on average over the same time-frame.

Schwab’s SDBA Indicators reports profile the investment behavior in 60,000 401(k) plans directing trades through the company’s self-directed brokerage accounts. A complete copy of the survey can be accessed at  http://scs.schwab.com/retirement_plan_services/sdba_indicators.html .