Volatility Prompts 401(k) Investors to Increase Trading

A volatile January on Wall Street prompted 401(k) investors to increase trading, according to the Alight Solutions 401(k) Index. There were five days of above-normal activity, which was three more than the combined total of the last four months of 2019.

Investors transferred 0.17% of their balances as a percentage of starting balances. They favored fixed income on 12 of the trading days, or 57% of the trading days, and equities on nine, or 43%.

Asset classes with the most trading inflows in January included bond funds, which took in 77% of the inflows, valued at $289 million, followed by target-date funds (TDFs) (12% and $46 million) and international equity funds (7% and $26 million).

Asset classes with the largest trading outflows were stable value funds (39% and $147 million), large U.S. equity funds (26% and $99 million) and small U.S. equity funds (15% and 55%).

Asset classes with the largest percentage of total balances at the end of January were TDFs (29% and $65.27 billion), large U.S. equity funds (26% and $57.72 billion) and stable value funds (9% and $20.81 billion).

Asset classes with the most contributions in January were TDFs (47% and $753 million), large U.S. equity funds (20% and $327 million) and international equity funds (7% and $116 million).

Returns for various asset classes came in either paltry or negative during January. U.S. bonds were up 1.9%, while U.S. large cap equities were flat, with 0% returns. U.S. small cap equities were down 3.2%, and international equities dropped 2.7%.