In fact, transfer activity among 401(k) participants was the lightest in the history of the Hewitt Associates 401(k) Index. Historically, just under 0.07% of 401(k) balances have transferred per day on a net basis; in June, participants transferred just 0.03% of their balances.
June’s light performance followed May’slighter than average daily net transfers, totaling just under 0.057% of the roughly $70 billion in 401(k) balances tracked by Hewitt(See Hewitt: K Plan Participants Flood Into Fixed-Income in May ). Hewitt attributed the lower than normal activity to “subdued market activity,” since 401(k) participants are most prone to transfer money in reaction to significant market increases or decreases.
However, when participants did make a move, they did so in the same irrational manner as has been the case since April,when investors poured money into equity investments in 71% of the days even though the S&P 500 was only positive for 11 days in the month (See 401(k) Participants Rush Back To Equities ). In June, the S&P 500 ended the day positive on 13 occasions, versus eight negative closes. Yet, investors favored fixed-income investments – traditionally the bastion of down market days – on 12 of those days, versus only nine days of equity-favored transfers.
In fact, the benchmarks were uniformly up in June. Leading the way was the Russell 2000 (4.21%), followed by NASDAQ (3.07%), Dow Jones (2.60%), MSCI EAFE (2.19%), S&P 500 (1.95%) and Lehman Aggregate (0.57%).
Examining monthly transfer/cash flow data for the month on the whole, Hewitt found most inflows be directed into Large US Equity selections (30.06%), followed by GIC/Stable Value (16.29%), International (14.33%), Mid US Equity (12.79%) and Lifestyle/Pre-Mix funds (11.67%). Leading the outflows was Company stock (-67.96%), followed by Bond (-24.57%), Emerging Markets (-6.74%) and Balanced funds (-0.73%).
At the end of June, equity investments represented just over 66% of total plan balances within the Index, the level around which participants’ 401(k) equity allocation has remained for much of 2004, Hewitt found.
More information and Hewitt’s data can be found at http://was4.hewitt.com/hewitt/services/401k/observ/04_june.htm .