SDBA Investors Still Moving Cautiously

June 19, 2002 ( - Investors with a self-directed brokerage account (SDBA) in their retirement plan continued taking a somewhat cautious approach during the first quarter of 2002, placing nearly half of their assets in mutual funds, according to the latest SDBA survey.

According to Charles Schwab’s Corporate Services latest SDBA Indicators report, 26% of SDBA assets were in equities during the quarter and 29% were held in cash and cash equivalents and fixed income securities.

In terms of asset flow during the period, mutual funds represented 70% of total net SDBA flows. The mutual funds to which the brokerage investors flocked, were in some of the best know fund families. The top ten fund holdings were from:

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  • American Century,
  • Artisan,
  • Fidelity,
  • Janus,
  • PIMCO, and
  • Vanguard

The picture emerging from the SDBA Indicators report is consistent with the investment company’s earlier surveys: cautious retirement investors relying on the SDBA account to access funds not already in their plan.

Further, SDBA investors appear to be reluctant to fuss with their asset allocation too often once they’ve made their initial allocations.

PIMCO Total Return Passes Magellan

The Schwab survey also indicated that, during the quarter:

  • the PIMCO Total Return Bond fund passed Fidelity Magellan as the most popular fund option. Magellan, Janus Fund, PIMCO Real Return Bond Fund, and Fidelity Growth & Income rounded out the top five fund holdings. This was the same list as the previous quarter.
  • most equity assets were concentrated in Citigroup, General Electric, and Pfizer, Only three top ten holdings were in technology companies – Microsoft, Intel and Cisco Systems.
  • taxable bond funds and individual fixed income securities, compromised 35% of net flows, a bit higher than the fourth quarter 2001 report.

Although SBDA participants weren’t afraid to shift assets to chase market fluctuations – 22% of net asset flows during the period were into high-performing small-cap funds – they didn’t fuss with their asset allocations too often. At the end of the quarter, small-cap equity funds were a fifth of total mutual fund assets – up from 16% a year ago.

SBDA investors made fewer than three trades on average over the quarter, the Schwab study found.

Investor Profile

The Schwab report participant profile was virtually identical to the previous report. The average Schwab Personal Choice Retirement Account balance was $57,234, up from almost $56,000 in the previous report.

The median invested within the plan and outside mirrored the last Schwab report with 37% in core plan offerings and the remainder in brokerage investments.

The Schwab report showcases data collected from plan participants who currently have at least a $5,000 balance in an SDBA through their Schwab 401(k) plan. The SDBA Indicators report profiles the investment behavior of approximately 60,000 401(k) plan participants investing through Schwab’s self-directed brokerage account.

Self-directed brokerage accounts (SDBAs) are brokerage accounts within 401(k)s that provide plan participants access to investments outside of their plan’s core holdings.

Read more at Self-Directeds Don’t Wander Far .