Schwab Report: Self-Directed 401(K) Investors’ Balances Down 6.3% Year-Over-Year After Volatile Fourth Quarter

Business Wire

SAN FRANCISCO--(BUSINESS WIRE)-- According to Charles Schwab’s SDBA Indicators Report^TM, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the market correction that occurred during the fourth quarter of 2018 weighed on participant accounts, as the average SDBA balance fell to $246,153, a decline of 10.6 percent from 3Q 2018 and 6.3 percent year-over-year.

SDBAs are brokerage accounts within retirement plans, including 401(k) and other types of retirement plans, which participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their retirement plan's core investment offerings.

According to the Schwab data, mutual funds continued to hold the highest percentage of participant assets at approximately 37 percent, the same as Q4 2017. Allocations to equities remained at 28 percent, and exchange-traded funds (17%), cash (15%), and fixed income (3%) rounded out participants’ portfolios. Despite the high market volatility experienced in the fourth quarter, participants averaged just 2.2 trades per month.

Allocation Trends

The data also reveals specific sector holdings within each investment category:

With regard to mutual funds, large-cap funds represented approximately 28 percent of all allocations, followed by taxable bond (21%), international (16%), hybrid (12%) and small-cap (12%) funds.
Apple (AAPL) was the top overall equity holding, representing approximately 9 percent of the equity allocation of portfolios. Amazon (AMZN) was the second-largest equity allocation, representing approximately 6.5 percent of portfolios, an increase of 3 percent since 4Q 2017. Berkshire Hathaway (BRKA) (3%), Microsoft (MSFT) (2%) and Facebook (FB) (1.75%) rounded out the top five equity holdings.
Among exchange-traded funds, investors allocated the most dollars to U.S. equity (48%), international equity (16%) and U.S. fixed income (15%).

Report Highlights

Additional findings include:

On average, participants held approximately 10 positions in their SDBA.
Baby Boomers and Gen X made up approximately 41 percent of SDBA participants each, followed by Millennials at 12 percent.
The average age of an SDBA participant was 51. Seventy-six percent of participants were male and 24 percent were female.

About the SDBA Indicators Report^TM

The SDBA Indicators Report includes data collected from approximately 137,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account®. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.

The SDBA Indicators Report tracks a wide variety of investment activity and profile information on participants with a Schwab Personal Choice Retirement Account (PCRA), ranging from asset allocation trends and asset flow in various equity, exchange-traded fund and mutual fund categories, to age trends and trading activity. The SDBA Indicators Report^TM provides insight into PCRA users’ perceptions of the markets and the investment decisions they make.

Data contained in this quarterly report is from the fourth quarter of 2018, and can be found at www.schwab.com/sdbaindicators, along with prior reports.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

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Disclosures

The securities shown are for informational purposes only and are not a recommendation to transact in any security.

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security.

Schwab Personal Choice Retirement Account® (PCRA) is offered through Charles Schwab & Co., Inc. (member SIPC), the registered broker/dealer, which also provides other brokerage and custody services to its customers.

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