Investing December 10, 2001

Participants Flee Company Stock, Bonds in November

December 10, 2001 (PLANSPONSOR.com) - Participants shifted strongly out of company stock in November, making up nearly 26% of the monthly transfers tracked by the Hewitt 401(k) index.
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However, most of the transfer flow came from bond funds, which made up almost 60% of the total transfers during the month, with money market (8.97%) and GIC/Stable Value (7.6%) making up the remainder.

Large and small US equity funds drew most of the fund transfers, splitting 70% of the total transfers from other funds. Mid US equities attracted 11%, while balanced funds pulled nearly 6%. Self-directed window funds pulled 4.27% of the total transfers.

Day Trading

Daily transfer levels were normal to moderate throughout the month, with net transfers averaging about 0.07% of balances during the month. Stock funds continued to draw participant interest, and money- with a greater percentage of equity-oriented transfer activity days than in any month since January 2000, according to Hewitt.

During November there were just 4 above normal volume trading days, but that was more active than October (see Participant Transfers Trend Toward Normal in October ). Transfers favored equity investments on 13 of the 21 trading days during the month.

New Money

Large US equities once again were the most popular investment for new contributions, attracting 29.21% of the total, followed closely by the 22% invested in company stock. GIC/Stable value investments were the third-most common, drawing 15.34% – but lifestyle/premix options drew more than 7% of the total.

Despite market volatility, at month-end, company stock continued to represent over 28% of total participant balances tracked by the Hewitt index, while the next two categories continued to be large US equity (22.87%) and GIC/Stable value, with 21.24%. Other categories included:

  • 7.14% – balanced
  • 3.91% – bond
  • 3.88% – lifestyle/premix
  • 3.02% – money market
  • 2.88% – international
  • 2.87% – mid US equity
  • 2.68% – small US equity

At month end, equities made up about 67% of the 401(k) balances tracked by the index, compared to an average percent of balances in equities of 71.2% since the inception of the Index, and a high of over 74% in late 2000.

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