Strong Performance Attracts 401(k) Investors Back Into Equities

Their portfolios' exposure to equities is back to pre-pandemic levels.

With the S&P 500 posting its best November ever, investors resumed trading into equities, according to the Alight Solutions 401(k) Index.

There were nine days in November in which trades went from fixed income into equities—a sharp contrast from October, when there were no such days. By the end of the month, investors had 66.9% of their balances in equities, the highest value since January, before the COVID-19 pandemic hit.

In November, 401(k) investors traded a mere 0.16% of their starting balances. There were 11 fixed income days, comprising 55% of all trading days, and nine equity days, comprising 45%.

Only three trading days were above normal.

Asset classes with the most trading inflows in November were bond funds, taking in 61% of inflows, valued at $219 million, followed by stable value funds (19%; $66 million) and target-date funds (TDFs) (8%; $28 million).

Asset classes with the most trading outflows in November were company stock (47%; $167 million), large U.S. equity funds (20%; $72 million) and balanced funds (13%; $46 million).

Asset classes with the largest percentage of total balance at the end of November were TDFs (29%; $69.8 billion), large U.S. equity funds (25%; $61.1 billion) and stable value funds (10%; $29.9 billion).

Asset classes with the most contributions in November were TDFs (47%; $479 million), large U.S. equity funds (20%; $204 million) and international equity funds (7%; $72 million).

All indexes gained in November, with all equities reaching doubt-digit returns. U.S. small equities were up 18.4%, international equities were up 13.5% and U.S. large equities gained 11%. U.S. bonds managed a 1% gain.