Balances Down, Trading Volume Up for Self-Directed 401(k) Investors

Trending with the recent market volatility, the average account balance for plan participants within self-directed brokerage accounts was down in the first quarter, while trading volumes were higher, according to Charles Schwab’s latest SDBA Indicators Report. 

The average account balance finished Q1 2020 at $252,675, down approximately 6% year-over-year and down 14% from Q4 2019. The first quarter SDBA Indicators Report also showed trading volumes increased compared to the previous quarter, at an average of 13 trades per account up from seven in Q4 2019, which Schwab notes is in line with broader investor activity seen during the first quarter as major stock indexes fell and trading activity rose amid market volatility.

 

Asset allocations remained similar to last quarter, with the exception of an increase in cash holdings from 12% in Q4 2019 to 19% in Q1. Mutual funds continue to hold the largest portion of participant assets (34%), followed by equities (27%), cash (19%), ETFs (17%) and fixed income (3%).

 

On average, participants held 10 positions in their SDBAs at the end of Q1 2020, which has remained steady both year-over-year and quarter-over-quarter, the report notes. 

 

Gen X made up approximately 43% of SDBA participants, followed by Baby Boomers (37%) and Millennials (14%).

 

Baby Boomers lead the way with the highest SDBA balances at an average of $367,425, followed by Gen X at $199,071 and Millennials at $65,207. 

 

Millennials once again had the highest percentage in cash out of the three generations at 21%, up 5% from last quarter. The cash holdings for Gen X and Baby Boomers increased to 19% and 18%, from 13% and 11.75%, respectively. Meanwhile, all three generations had very similar equity holdings, with Apple, Amazon, Berkshire Hathaway, Microsoft and Facebook coming in at the top.
 

 

The report also highlights significant differences in balances between Schwab’s advised and non-advised clients. 

 

Gen X had the most advised accounts at 45%, followed closely behind by Baby Boomers (41%) and Millennials (11%). The average participant balance for advised accounts was down to $395,618 from $466,805 last quarter, while non-advised accounts were also down from last quarter at $216,729 from $250,099. Those with advised accounts also had more average trades, registering at 16.5 total, compared to 12.7 for non-advised accounts. 

 

Schwab further observes that those participants who used advisors displayed a more diversified asset allocation mix and had a lower concentration of assets in particular securities, with Apple being the top one for everyone; advised participants only had 8.14% of their equity assets with Apple, while non-advised participants had 11.63%. 

 

Advised participants also had a lower percentage in cash, very similar to last quarter: 9.14% vs. 22.83% for non-advised, showing a balanced amount among all the advised investments.
As for ETF holdings, Schwab notes that advised participants again had more balance among all the holdings, not having more than 3.84% of any one ETF, with Vanguard being the top one. Advisors preferred DFA US Core Equity Institutional fund as a top fund holding and DFA as a top fund family, with a 18.72% mutual fund asset allocation. 

 

Non-advised participants had Schwab S&P 500 Index as the top mutual fund holding and 17.52% of the mutual fund asset allocation went to the Vanguard fund family, followed by Schwab.
The SDBA Indicators Report is based on data collected from approximately 145,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account.