In 2020, 401(k) investors were busy traders out of equities as stocks were falling and slowly returned to them after their rebound. Net transfers for the year as a percent of balance was 3.51%, the highest level since 2008. The year had 47 days of days of above-normal1 activity, with 26 of these days occurring during a six week stretch from the end of February to early April when the world was coming to grips with the COVID-19 pandemic.
“In some ways, there was a full market cycle in 2020. There was a steep drop in March followed by a sustained recovery throughout the remaining months of the year. Unfortunately, we saw many investors repeat the unfortunate trend of selling low and buying high that has been shown repeatedly throughout the more than 20-year history of the Alight Solutions 401(k) IndexTM. The busiest days for trading were when the stocks were tumbling, and the trades overwhelmingly went from equities to fixed income. It wasn’t until the end of the year—when the market was setting new record highs—that investors traded back into equities.” – Rob Austin, head of research at Alight Solutions.
Asset classes with most trading inflows in 2020
| Percentage of inflows | Index dollar value ($ mil) | |
| Bond funds | 44% | $3,509 |
| Stable value funds | 39% | $3,052 |
| Money market funds | 13% | $1,030 |
Asset classes with most trading outflows in 2020
| Percentage of outflows | Index dollar value ($ mil) | |
| Large U.S. equity funds | 38% | $2,987 |
| Target date2 funds | 27% | $2,142 |
| Company stock | 10% | $782 |
Asset classes with most contributions in 2020
| Percentage of contributions | Index dollar value ($ mil) | |
| Target date2 funds | 46% | $7,071 |
| Large U.S. equity funds | 20% | $3,125 |
| International funds | 7% | $1,072 |
Percentage of balances by asset class
| Asset class | Year end 2020 | Year end 2019 | Change |
| Money market | 1.1% | 1.0% | 0.1% |
| Stable value | 9.1% | 9.5% | -0.4% |
| Bond | 8.3% | 7.9% | 0.4% |
| Balanced | 1.6% | 2.0% | -0.4% |
| Target date funds | 29.6% | 29.3% | 0.3% |
| Large cap U.S. equity | 25.0% | 26.0% | -1.0% |
| Mid cap U.S. equity | 5.3% | 4.8% | 0.5% |
| Small cap U.S. equity | 3.0% | 2.9% | 0.1% |
| International | 6.3% | 6.5% | -0.2% |
| Emerging markets | 1.4% | 1.3% | 0.1% |
| Specialty/sector | 0.3% | 0.4% | -0.1% |
| Company stock | 6.2% | 6.3% | -0.1% |
| Self-directed brokerage | 2.7% | 2.1% | 0.6% |
| Asset type | Year end 2020 | Year end 2019 | Change |
| Equity | 67.7% | 68.1% | -0.4% |
| Fixed income | 32.3% | 31.9% | 0.4% |
After reflecting contributions, trades, and market activity, 401(k) investors ended 2020 with 67.7% in equities, down slightly from 68.1% at the beginning of the year.
| Index statistics | 2020 |
| Total transfers as percentage of starting balance | 3.51% |
| # Fixed days | 184 (73%) |
| # Equity days | 69 (27%) |
| # Above normal days | 47 |
The following table shows the returns of major market indices for the year ending December 31, 2020:
| Returns for common indices | 2020 |
| Bloomberg Barclays U.S. Aggregate Index | 7.5% |
| S&P 500 Index | 18.4% |
| Russell 2000 Index | 20.0% |
| MSCI All Country World ex-U.S. Index (net) | 10.7% |
Members of the media: please contact Landis Cullen for questions about the Alight Solutions 401(k) Index™.
- A “normal” level of relative transfer activity is when the net daily movement of participants’ balances as a percent of total 401(k) balances within the Alight Solutions 401(k) Index™ equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and two times the average daily net activity of the preceding 12 months.
- Target date funds also include the amounts in target risk funds for companies who do not have target date funds. The amount in the target risk funds is less than 10% of the total.
