Schwab: Self-Directed 401(k) Balances Higher As Investors Remain Resilient

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

The fourth quarter 2021 SDBA Indicators Report reflects continued resilience among investors through a historically volatile year. November began with fears over new COVID variants, inflation, and Fed asset tapering, but balances ultimately ended the quarter higher as investor concerns subsided and the economy proved stable overall.

Participant holdings remained similar to the fourth quarter of 2020, with a slight decrease in cash holdings and slight increases in equities and ETFs. The majority of participant assets were held in equities (37% in 2021 vs 35% in 2020). Mutual funds were the second largest holding at 30% (vs 31% in 2020), followed by ETFs (21% vs 18% in 2020), cash (11% vs 14% in 2020), and fixed income (1% vs 2% in 2020).

Allocation Trends

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

• Mutual funds: Large-cap funds had the largest allocation at approximately 35.1% of all mutual fund allocations, higher than last year (31.9%). They were followed by taxable bond (18.5%) and international (14.9%) funds.
• Equities: The largest equity sector holding was Information Technology at 31.8%, up slightly from 29.8% last quarter and similar to last year. The top five equity holdings remained the same as last quarter. Apple was the top overall equity holding, comprising 11.9% of the equity allocation of portfolios, followed by Tesla (8.5%), Amazon (4.5%), Microsoft (3.2%) and NVIDIA (2.7%).
• ETFs: Among ETFs, investors continued to allocate the most dollars to U.S. equity (51.5%), followed by sector ETFs (13.4%), U.S. fixed income (12.8%) and international equity (12.4%). Year over year, investors increased U.S. equity allocations by 2.3 percentage points and decreased fixed income allocations by 2.2 percentage points.

Other Report Highlights

• Advised accounts held higher average account balances compared to non-advised accounts - $558,470 vs. $304,164.
• Gen X had the most advised accounts at 48.9%, followed by Baby Boomers (33.7%) and Millennials (14.5%).
• Gen X made up approximately 45.2% of SDBA participants, followed by Baby Boomers (30.7%) and Millennials (18.5%).
• Baby Boomers had the highest SDBA balances at an average of $548,658, followed by Gen X at $315,574 and Millennials at $106,408.
• Quarterly trading volumes were slightly lower than one year ago, down to 13.3 trades from 13.9, and similar to last quarter (13.1).
• On average, participants held 12.5 positions in their SDBAs at the end of Q4 2021, consistent with Q3 2021 and higher than Q4 2020 (11.4).

About the SDBA Indicators Report

The SDBA Indicators Report includes data collected from approximately 178,000 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 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 2021, and can be found here, along with prior reports.

About Charles Schwab

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Disclosures:

Brokerage Products: Not FDIC‐Insured • No Bank Guarantee • May Lose Value

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.

All corporate names are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.