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Nowhere to Hide: Self-Directed 401(k) Investors Also Take a Hit

Practice Management


While self-directed 401(k) investor balances increased in the fourth quarter, year-over-year returns remained negative  — consistent with the market overall, according to Charles Schwab’s SDBA Indicators Report

The report, which tracks retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), finds that the average account balance across all participant accounts finished at $280,099 for the fourth quarter ending Dec. 31, up by 2.45% from the third quarter of 2022, but down 20.6% from $352,764 the previous year.  

Allocation Trends

 

Overall, participant holdings were similar to the third quarter. 

Equities remained the largest holding at 31.3%. The largest equity sector holding was Information Technology at 28.7%. The top equity holdings remained Apple (11.9%), Tesla (4.98%), Amazon (3.9%) and Microsoft (3.3%). Berkshire Hathaway held 2.3%.

Mutual funds were the second largest holding at 29.4%, with the largest allocation going to large-cap stock funds at 32.7%. They were followed by taxable bond (18.3%) and international (14.1%) funds. 

ETFs held 22.1% of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (51.7%), followed by fixed income (13.8%), international equity (13.1%) and sector (11.3%) ETFs. 

Other Highlights

 

Trading volumes were lower at an average of 9.6 trades per account compared to 10.6 trades per account in the third quarter and lower than a year ago. Participants made the most trades in their equities holdings, followed by ETFs and mutual funds.

Baby Boomers continued to have the highest SDBA balances at an average of $453,554, followed by Gen X at $252,171 and Millennials at $85,446.

On average, participants held 12.6 positions in their SDBAs at the end of Q4 2022, similar to the previous year and the previous quarter.

Millennials and Gen X again had the higher percentage of mobile trades at 32%, and 26%, with Baby Boomers at 24%. 

The report includes data collected from approximately 187,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account.