Schwab Report: Self-Directed 401(k) Investors’ Balances Declined with the Market in the Second Quarter

According to Charles Schwab’s SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance across all participant accounts finished at $283,485 for the second quarter ending June 30, an 18.58% decrease year-over-year and a 14.62% decrease from the first quarter of 2022.

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 Q2 SDBA Indicators reflected another volatile period for markets prior to the July/August market recovery. In the second quarter, the S&P 500 hit its lowest level since December 2020 as still-high inflation, sharp increases in interest rates, rising recession risks, and ongoing geopolitical unrest pressured stocks and other assets. Against this backdrop, equity allocations decreased to 33% of assets, down from 37% last year and 36% in the first quarter. Cash allocations increased to 15% of assets, up from 12% last year and 13% in the first quarter.

Allocation trends

Overall, participant holdings remained similar to the previous quarter.

  • Equities: Equities remained the largest holding. The largest equity sector holding was Information Technology at 29.1%. The top equity holdings were again Apple (12.0%), Tesla (8.1%), Amazon (4.4%) Microsoft (3.4%) and NVIDIA (1.9%).
  • Mutual funds: Mutual funds were the second largest holding at 28.8%, with the largest allocation going to large-cap stock funds at 33.9%. They were followed by taxable bond (20.0%) and international (14.2%) funds.
  • ETFs: ETFs held nearly 21% (20.9%) of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (50.9%), followed by fixed income (13.8%), international equity (13.1%) and sector (12.0%) ETFs.

Other Report Highlights

  • Advised accounts held higher average account balances compared to non-advised accounts, $460,376 vs. $240,974.
  • Gen X had the most advised accounts at 50.0%, followed by Baby Boomers (31.5%) and Millennials (15.4%).
  • Gen X made up approximately 46% of SDBA participants, followed by Baby Boomers (30%) and Millennials (19%).
  • Baby Boomers had the highest SDBA balances at an average of $452,381, followed by Gen X at $252,477 and Millennials at $85,121.
  • Trading volumes were lower at an average of 11 trades per account compared to 14 last quarter and a year ago.
  • On average, participants held 13 positions in their SDBAs at the end of Q2 2022, consistent with the previous quarter and similar to last year.

About the SDBA Indicators Report

The SDBA Indicators Report includes data collected from approximately 184,000 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 second quarter of 2022, and can be found here, 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.

More information is available at aboutschwab.com. Follow us on Twitter, Facebook, YouTube, and LinkedIn.

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.

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Source: The Charles Schwab Corporation