The introduction to Charles Schwab’s quarterly SDBA
Indicators Report perhaps best sums up the first half of the year: “There is
nothing normal about the nature of this cycle.”
The firm’s quarterly report observes that the S&P 500
index dropped 34% from February 19 to March 23 and then rebounded almost as
swiftly, increasing over 35% from its March lows to the end of the second
quarter, as the U.S. economy began re-opening.
Against that backdrop, the SDBA Indicators Report, which
tracks retirement plan participant investment activity within Schwab
self-directed brokerage accounts (SDBAs), reveals that the average account
balance across all participant accounts finished the second quarter at
$285,616—a 3.3% increase year-over-year and a 13% increase from the first
quarter of 2020.
The second quarter report also shows that trading volumes
were slightly higher, at an average of 14 trades per account up from 13.4
trades in the first quarter.
Allocation Trends
Asset allocation remained similar to the first quarter, with
the exception of an increase in equities holdings from 27% in the first quarter
to 30% in the second. Mutual funds continue to hold a majority of participant
assets (33%), followed by equities (30%), ETFs (18%), cash (17%) and fixed
income (2%).
Large-cap funds had the largest allocation at approximately
31% of all mutual fund allocations, followed by taxable bond (21%) and
international (14%) funds. Information technology remained the largest equity
sector holding at 30%, up from 29% in the first quarter.
Apple continues to be the top overall equity holding,
comprising 11% of the equity allocation of portfolios, followed by Amazon
(7.1%), Microsoft (3.5%), Tesla (3%) and Berkshire Hathaway (1.9%) rounding out
the top five.
Among ETFs, Schwab notes that investors allocated the most
dollars to U.S. equity (47%), followed by U.S. fixed income (18%),
international equity (12%) and sector ETFs (12%).
Generational Differences
On average, participants held 10.5 positions in their SDBAs
at the end of the second quarter, which the report notes have remained
consistent both year-over-year and quarter-over-quarter. Baby Boomers held more
positions in their SDBA than other generations, registering at nearly 11.9,
versus 10.3 for Gen X and 7.9 for Millennials.
Gen X made up approximately 43% of SDBA participants,
followed by Baby Boomers (36%) and Millennials (15%). Not surprisingly, Baby
Boomers had the highest SDBA balances at an average of $418,743, followed by
Gen X at $231,798 and Millennials at $76,282.
Gen X had the most advised accounts at 46%. Baby Boomers
were not far behind at 40%, while only 11.1% of the Millennials chose to use an
advisor.
Notably, the average participant balance for advised
accounts was up to $446,638 from $395,618 last quarter, while non-advised
accounts were also up from last quarter at $246,239 from $216,729.
Those with advised accounts also had more average trades—at
15.7 total versus 13.6 for non-advised accounts. Overall, the trading volume
remained similar compared to last quarter and increased compared to last year.
Millennials and Gen X again had similar percentage of mobile
trades at 33% and 28%, with Baby Boomers trailing at 20%. Once again,
Millennials had the highest percentage in cash out of the three generations at
18.91%, but that was down 2.09% from last quarter. Cash holdings for Gen X and
Baby Boomers also decreased to 17.31% and 15.92%, from 19% and 18%,
respectively.
The report includes data collected from approximately
152,000 retirement plan participants who currently have balances between $5,000
and $10 million in their Schwab Personal Choice Retirement Account.
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