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Schwab Report: Self-Directed 401(k) Investors' Balances Decline in a Volatile Q3 Market, Asset Allocations and Trading Remain Steady

11/29/2022

WESTLAKE, TexasAccording to Charles Schwab’s SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance across all participant accounts finished at $273,412 for the third quarter ending September 30, down by 3.55% from the second quarter of 2022 and down 19.84% year-over-year.

SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds (ETFs), mutual funds and other securities that are not part of their retirement plan's core investment offerings.

The Q3 SDBA Indicators reflected another volatile period with some recovery in July and August before markets retracted in September for a third consecutive quarter of negative returns amid high inflation, increasing interest rates, rising recession risks, and ongoing geopolitical unrest.

Allocation Trends

Overall, participant holdings were similar to the second quarter.

  • Equities: Equities remained the largest holding. The largest equity sector holding was Information Technology at 28.8%. The top equity holdings remained Apple (12.5%), Tesla (9.6%), Amazon (4.8%) and Microsoft (3.2%). Berkshire Hathaway held 1.95%.
  • Mutual funds: Mutual funds were the second largest holding at 28.4%, with the largest allocation going to large-cap stock funds at 33.7%. They were followed by taxable bond (19.7%) and international (12.9%) funds.
  • ETFs: ETFs held nearly 21% (20.96%) of participant assets. Among ETFs, investors continued to allocate the most dollars to U.S. equity (51.7%), followed by fixed income (14.1%), international equity (12.7%) and sector (11.3%) ETFs.

Other Report Highlights

  • Trading volumes were slightly lower at an average of 10.6 trades per account compared to 11.2 trades per account in the second quarter and a year ago.
  • Advised accounts held higher average account balances compared to non-advised accounts, $435,604 vs. $233,875.
  • Gen X had the most advised accounts (50.0%), followed by Baby Boomers (30.7%) and Millennials (15.8%).
  • Gen X made up approximately 46% of SDBA participants, followed by Baby Boomers (30%) and Millennials (19%).
  • Baby Boomers had the highest SDBA balances at an average of $437,280, followed by Gen X at $246,206 and Millennials at $83,408.
  • On average, participants held 13 positions in their SDBAs at the end of Q3 2022, consistent with the second quarter and similar to last year.

About the SDBA Indicators Report

The SDBA Indicators Report includes data collected from approximately 186,000 retirement plan participants who currently have balances between $5,000 and $10 million in their Schwab Personal Choice Retirement Account®. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.

The SDBA Indicators Report tracks a wide variety of investment activity and profile information on participants with a Schwab Personal Choice Retirement Account (PCRA), ranging from asset allocation trends and asset flow in various equity, exchange-traded fund and mutual fund categories, to age trends and trading activity. The SDBA Indicators Report provides insight into PCRA users’ perceptions of the markets and the investment decisions they make.

Data contained in this quarterly report is from the third quarter of 2022, and can be found here, along with prior reports.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures:

Brokerage Products: Not FDICInsured • No Bank Guarantee • May Lose Value

The securities shown are for informational purposes only and are not a recommendation to transact in any security.

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPCwww.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security.

Schwab Personal Choice Retirement Account® (PCRA) is offered through Charles Schwab & Co., Inc. (member SIPC), the registered broker/dealer, which also provides other brokerage and custody services to its customers.

All corporate names are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

[1222-2DZ3]

Contact:

Mike Peterson
Charles Schwab
330-908-4334
mike.peterson@schwab.com

Carly Taylor
The Neibart Group
973-618-6993
schwabrps@neibartgroup.com

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