401(k) Investors Pursue Greater Balance After Bear Markets

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Source: Employee Benefit Research Institute

Gee, why is it that 401(k) investors would pursue greater balance in their portfolios after bear markets?

After a decade marked by two severe bear markets, 401(k) plan participants have adopted a more balanced approach to their portfolios, according to a report released today by the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI). Fears that younger participants in 401(k) plans would abandon stock investing are not borne out by the date, which suggest that greater use o target-date funds is helping workers keep their investing on track.

The shares of 401(k) participants who had either no equities at all or high concentrations of equities were lower in 2010 than in 2000 for almost every age group, according to the EBRI/ICI report, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2010.

Among all 401(k) plan participants in 2000, 12.7 percent held no equity investments (either in equity funds, the equity portion of balanced funds, or company stock), while 54.1 percent had more than 80 percent of their plan accounts allocated to equities.

In the current study’s sample of more than 23 million participants, 401(k) participants had moderated their account allocations to equities: 11.8 percent of account holders had no allocation to stocks, while the share of participants with more than 80 percent of their balances invested in stocks dropped to 40.0 percent.

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