401(k) Investors Still Cautious in Volatile Market

Alight Solutions has published the May update of its 401(k) Index, noting that, with ongoing volatility in the equity markets, 401(k) investors were active but cautious traders.

The month saw 12 above-normal trading days, but no day exceeded three times the average, Alight says. All but three days in the month saw net trading activity moving money from equities to fixed income.

On average, 0.018% of 401(k) balances were traded daily, compared to an average of 0.011% last month. Investors favored moving assets into fixed-income funds during 18 out of 21 trading days. Trading inflows mainly went to stable value, money market and self-directed window funds, while outflows were primarily from target-date, large U.S. equity and bond funds, Alight says.

After reflecting market movements and trading activity, average asset allocation in equities decreased from 69.1% in April to 68.8% in May, Alight says. New contributions to equities decreased from 69.5% in April to 69.0% in May.

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.