Net trading activity among 401(k) participants last year was the lowest on record while the equity component in retirement accounts was the highest since 2000, according to the Alight Solutions 401(k) Index.
"Net trading activity for the year was 0.53% of balances," the lowest since the firm began tracking 401(k) investing in 1997, said a report on the Alight Solutions website. Trading activity in 2020 was 3.51% of account balances when markets were more volatile, the report said.
In 2021, participants were "mostly content to watch their balances grow," said the report on the index, which covers more than 2 million participants with more than $200 billion in Alight record-keeping accounts.
Participants raised their net equity allocations to 70.7% last year vs. 67.7% at year-end 2020. The equity exposure is the highest since the 73% recorded in 2000. Last year's higher equity allocation was due to "light trading activity during the year, new contributions overwhelmingly favoring equities, and near-record highs in equity markets," the report said.
Asset classes with the largest percentage of trading inflows last year were stable value (28%), bond funds (26%) and specialty/sector funds (16%). The categories with the largest percentage of trading outflows were U.S. large cap equity funds (57%) and target date/target risk funds (41%).
"When trades occurred, they tended to see people in profit-taking mode, moving money from large-cap U.S. equities and target-date funds into more conservative investments like stable value and bond funds," the report said.
However, target-date/target-risk funds (46%) and U.S. large-cap equity funds (21%) were the asset categories with the biggest percentage contributions last year, the report said.
