Schwab Report: Self-Directed 401(k) Balances Show Steady Growth in Q3; Advised Accounts Reflect Broader Diversification and Higher Account Balances

SAN FRANCISCO--()--According 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 Q3 2020 at $302,256, a 9% increase year-over-year and a 6% increase from Q2 2020.

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, mutual funds and other securities that are not part of their retirement plan's core investment offerings.

The third quarter SDBA Indicators Report also showed that advised accounts hold higher average account balances compared to non-advised accounts - $473,875 vs $261,240. Participants with advised accounts also have a more diversified asset allocation mix, including a lower concentration of assets in individual securities. For example, the top individual equity holding across all participants is Apple, comprising 13% of equity assets on average. However, advised participants only had approximately 8% of their equity assets in Apple, while non-advised participants had 14%.

Overall, asset allocation remained similar to Q2 with the exception of an increase in equities from 30.15% in Q2 to 32.54% in Q3. The majority of participant assets were held in equities, followed by mutual funds (32%), ETFs (18%), cash (16%), and fixed income (2%).

Allocation Trends

The data also reveals specific asset class and sector holdings within each investment category:

  • Mutual funds: Large-cap funds had the largest allocation at approximately 32% of all mutual fund allocations, followed by taxable bond (21%) and international (14%) funds.
  • Equities: Information technology remained the largest equity sector holding at 31%, up from 30% in Q2 2020. Apple continues to be the top overall equity holding, comprising 13% of the equity allocation of portfolios. The other equity holdings in the top five include Amazon (6.8%), Tesla (6.1%), Microsoft (3.1%), and Nvidia (1.8%).
  • ETFs: Among ETFs, investors allocated the most dollars to U.S. equity (48%), followed by U.S. fixed income (17%), international equity (12%) and sector ETFs (12%).

Other Report Highlights

  • On average, participants held 10.8 positions in their SDBAs at the end of Q3 2020, which has remained consistent both year-over-year and quarter-over-quarter. Baby Boomers held more positions in their SDBA than other generations (12.2 vs. Gen X: 10.8, Millennials: 8.3).
  • Trading volumes were down slightly quarter-over-quarter at 13.6 average trades per account in Q3 versus 14 in Q2. Participants made the most trades in their equities holdings, followed by ETFs and mutual funds.
  • Gen X made up approximately 44% of SDBA participants, followed by Baby Boomers (35%) and Millennials (15%).
  • Gen X had the most advised accounts at 46%, followed by Baby Boomers (40%) and Millennials (11%).
  • Baby Boomers had the highest SDBA balances at an average of $446,660, followed by Gen X at $250,076 and Millennials at $83,073.

About the SDBA Indicators Report

The SDBA Indicators Report includes data collected from approximately 156,000 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 2020, and can be found here, along with prior reports.

About Charles Schwab

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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.

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Mike Peterson
Charles Schwab

Travis Fishstein
The Neibart Group

Release Summary

According to Charles Schwab’s SDBA Indicators Report, self-directed 401(k) balances show steady growth in Q3.


Mike Peterson
Charles Schwab

Travis Fishstein
The Neibart Group