According to the Alight Solutions 401(k) IndexTM, 2018 was an interesting year for trading activity among 401(k) investors. On the one hand, participants were very active during the year, with 46 days of above-normal1 daily transfer activity--the highest number of above-normal days in the last five years, much higher than the 13 days of above-normal trading in 2017. On the other hand, net trades in 2018 amounted to only 1.42% of total plan balances, making 2018 a record low year for trading activity in the over 20-year history of the Index.
This apparent discrepancy is attributed to the fact that many of the high trading activity days were concentrated around the beginning of the year and toward the end of the year, with the trades moving in opposite directions. Investors started the year in January with a rush to equities. The first seven trading days of the year and 18 of the first 28 trading days were above-normal with nearly universal movement from fixed income investments to equity funds. However, investors reversed this trend in December when Wall Street plummeted. During the seven-day stretch when the Dow dropped by at least 350 points six times, every day was an above-normal day with money flowing from equities to fixed income. In essence, these trades canceled out the actions from the beginning of the year.
| Asset classes with most trading inflows in 2018 | Percentage of inflows | Index dollar value ($ mil) |
|---|---|---|
| Stable value funds | 56% | $1,628 |
| Money market funds | 19% | $542 |
| Bond funds | 13% | $392 |
| Asset classes with most trading outflows in 2018 | Percentage of outflows | Index dollar value ($ mil) |
|---|---|---|
| Target date funds2 | 53% | $1,545 |
| Company stock | 22% | $648 |
| Large U.S. equity funds | 13% | $368 |
| Asset classes with most contributions in 2018 | Percentage of contributions | Index dollar value ($ mil) |
|---|---|---|
| Target date funds | 46% | $6,566 |
| Large U.S. equity funds | 20% | $2,823 |
| International funds | 8% | $1,149 |
| Percentage of balances by asset class | Year end 2018 | Year end 2017 | Change |
|---|---|---|---|
| Money market | 1.2% | 1.1% | 0.1% |
| Stable value | 11.2% | 10.1% | 1.1% |
| Bond | 8.0% | 7.5% | 0.5% |
| Balanced | 2.1% | 2.3% | (-0.2%) |
| Target date funds | 28.0% | 27.2% | 0.8% |
| Large cap U.S. equity | 24.1% | 23.8% | 0.3% |
| Mid cap U.S. equity | 4.7% | 5.2% | (-0.5%) |
| Small cap U.S. equity | 3.0% | 3.2% | (-0.2%) |
| International | 6.9% | 8.1% | (-1.2%) |
| Emerging markets | 1.3% | 0.7% | 0.6% |
| Specialty/sector | 0.5% | 0.6% | (-0.1%) |
| Company stock | 6.9% | 8.2% | (-1.3%) |
| Self-directed brokerage | 2.1% | 2.0% | 0.1% |
| Asset type | Year end 2018 | Year end 2017 | Change |
| Equity | 66.6% | 68.6% | (-2.0%) |
| Fixed income | 33.4% | 31.4% | 2.0% |
After reflecting contributions, trades, and market activity, 401(k) investors ended 2018 with 66.6% in equities, down from 68.6% at the beginning of the year.
| Index statistics | 2018 |
|---|---|
| Total transfers as percentage of starting balance | 1.42% |
| # Fixed days | 155(62%) |
| # Equity days | 96(38%) |
| # Above normal days | 46 |
The following table shows the returns of major market indices for the year ending December 31, 2018:
| Returns of common indices | 2018 |
|---|---|
| Bloomberg Barclays Capital U.S. Aggregate Index | 0.0% |
| S&P 500 Index | -4.4% |
| Russell 2000 Index | -11.0% |
| MSCI All Country World ex-U.S.A. Index (net) | -14.2% |
Members of the media: please contact MacKenzie Lucas for questions about the Alight Solutions 401(k) Index™.
Learn more about the Alight Solutions 401(k) Index here.
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