401(k) Participants’ Actions Lead to Heaviest Quarter of Net Trading Since 2016

For the 17th straight month, 401(k) investor trades have favored fixed income over equities, according to the Alight Solutions 401(k) Index.

In June, 17 of 20 trading days favored fixed income. While investors may still have a fear of the markets since the steep correction in December in spite of good equity returns, Alight Solutions suggests they are moving to fixed income in part to preserve their gains.

Trading inflows mainly went to bond (40% or $180 million), stable value (38% or $174 million) and money market (16% or $74 million) funds.  Outflows were primarily from large U.S. equity (48%) or $217 million), company stock (31% or $142 million) and small U.S. equity (15% or $67 million) funds.

Still, average asset allocation in equities increased from 67% in May to 67.7% in June, but new contributions in equities decreased from 67.9% in May to 67.7% in June.

Alight Solutions says the steady stream of trades in one direction made for the heaviest quarter of net trading since the third quarter of 2016. In the second quarter, 53 out of 63 trading days had net trading dollars moving from equities to fixed income. Net transfers for the quarter were 0.61% of balances.

More than half (55%) of trading inflows went to bond funds during the quarter, with 23% going to stable value funds and 14% going to money market funds.