Schwab: PCRA Participants Self-Direct Assets Into Mutual Funds, Equities

Money poured into virtually all investment vehicles during the second quarter of 2003, with only a slight outflow (-0.3%) recorded among options. The strongest gains were noted in mutual funds, which netted nearly half (49.1%) of net asset flows for the April through June period, followed by net asset gains in equities (31.3%), fixed-income (19.6%) and money market funds (0.3%), according to Charles Schwab Corporate Services’ second quarter 2003 Self Directed Brokerage Account Indicators (SDBA) report.

Likewise, dominating the asset class net flows was movement into mutual fund and equity positions during the second quarter. Leading the way was 16.6% of the net asset flow being directed into small cap stock funds, followed by taxable bond funds (16.3%), and health care equities (9.9%). Other net asset flow totals revealed:

• 6.9% – large cap stock funds
• 6.4% – asset allocation funds
• 5.9% – international
• 5.9% – financial equities
• 5.2% – information technology equities
• 4.5% – consumer discretionary equities.

After the dust had settled, mutual funds still held the lion’s share of PCRA participants investments (40%), followed by cash and equivalents (28%), equities (26%) and fixed-income (7%). This represents only a slight deviation from the second quarter of 2002, when mutual funds held 43% of participant balances. Among mutual funds in the second quarter, most positions were taken in large cap stock funds (40%), followed by:

• 22% – small cap stock funds
• 10% – international funds
• 15% – taxable bonds funds
• 7% – specialized funds
• 6% – asset allocation funds.

Active Trades

Also up during the second three-month set was trading activity; picking up 35% to 2.57 trades per account compared with only 1.91 trades in the previous quarter. Driving this trend was equity trading, up to 1.41 trades per account during the second quarter compared to less than one trade per account (0.97) in the prior quarter. In other investment options trading was not so gusto, with mutual funds recording only 1.08 trades and fixed-income a microscopic 0.08 trades.

At the conclusion of the second quarter, the majority (34.8%) of PCRA participants fell in the 40 to 49 age bracket – the average age being 45. Other age groups were represented by:

• 27.7% – age 30 to 39
• 24.3% – age 50 to 59
• 7.1% – age 60 to 69
• 5.3% – age 20 to 29.

Schwab also noted the average PCRA account balance was $79,949.

The SDBA Indicators report profiles the investment behavior of approximately 60,000 401(k) plan participants investing through Schwab’s self-directed brokerage account, the PCRA, with account balances between $5,000 and $2 million. SDBAs are brokerage accounts within 401(k) plans that provide participants access to investments (stocks, mutual funds, fixed income securities) outside of their plan’s core fund offerings.