Self-Directed Participants Again Favor Equities in Q1

The new year opened with a bang, as the increase in trading activity –   up to 3.5 trades per account – marked the highest levels forCharles Schwab Corporate Services’ SDBA Indicators report since thereport first appeared in 2001.   By comparison trading activity was 2.94 trades per account in the previous report (See   Schwab: SDBA Investors Still Diving Into Funds ).

After the first quarter’s activity, m utual funds and stocks now account for more than 75% of SDBA account holder assets, compared with the 62% so invested last year in SDBAs – brokerage accounts within 401(k) plans and other types of participant-directed defined contribution plans that participants can use to invest in stocks, mutual funds and fixed income securities outside the plan.  Schwab points to the movement as a vote of confidence in where the market is headed.

For the quarter, mutual funds accounted for 62% of asset inflows, up 2% from the prior quarter, while equity inflows were down 5% to 32%.   An interesting trend – the largest portion of equity inflows for the quarter were e xchange traded funds (ETFs).

Even within mutual funds, Schwab noted a shift away from conservative holdings – such as large cap and taxable bond funds – during the first three months of the year as investors moved into small cap and international fund offerings.

Gender Differences

Broken down by gender differences, Schwab found men still maintain more of their 401(k) plan assets in SDBAs (89%) versus their female counterparts (82%).   Additionally, men made more trades on average per account (3.8 versus 3.1) and held more positions (9.0 versus 6.6).

Examining the account holdings of female participants, Schwab found this group’s largest equity holdings were:

• Joseph A Bank Clothiers,
• Microsoft Corp, and
• Washington Mutual.  

Men on the other hand were heavily weighted toward techs, with the top three holdings being Intel, Cisco Systems and NASDAQ 100 Shares.

Commenting on the gender gap, Carrie Schwab Pomerantz, president of the Charles Schwab Corporation Foundation and founder of the Schwab Women’s Investing Network said the results were in line with expectations that show “women, relative to male SDBA account holders, tend to be more conservative and focus more on the core funds offered in their retirement plans versus SDBAs.”

The SDBA Indicators report profiles the investment behavior of approximately 60,000 defined contribution plan participants investing through Schwab’s self-directed brokerage account, the Schwab Personal Choice Retirement Account (PCRA).   The next report detailing SDBA trading activity in the second quarter 2004, will be available in August. Indicator reports are available at  www.schwab.com/sdbaindicators .