Active 401(k) Investing: A Response to Market Volatility
In the last few weeks, the financial markets have experienced a significant level of volatility. Amidst this uncertainty, some investors have been taking a more active approach to their 401(k) holdings. CNBC’s Sharon Epperson reported on this trend during an appearance on “Squawk Box.”
Investor Behavior in Times of Market Volatility
Historically, market volatility can lead to increased anxiety among investors. Some may choose to take a “wait and see” approach, while others may feel compelled to make changes to their portfolios. According to Epperson, recent data indicates that a growing number of investors are taking the latter route.
The Data
According to the latest figures from Fidelity Investments, the average 401(k) balance rose by 1.3% in February. However, this increase was not evenly distributed. Epperson reported that “more than half of the gains came from trading activity.”
Impact on Individual Investors
For individual investors, this trend can have both positive and negative implications. On the one hand, an active approach to 401(k) management may allow investors to capitalize on market fluctuations. By buying low and selling high, they may be able to increase their overall returns. On the other hand, frequent trading can also result in higher fees and taxes.
Impact on the World
The trend towards more active 401(k) management is not just affecting individual investors. According to a report from Cerulli Associates, assets under management in target date funds – a popular choice for 401(k) investors – are projected to reach $3 trillion by 2025. This growth is expected to be driven in part by increased investor engagement and a focus on customized investment solutions.
Conclusion
The recent market volatility has led some investors to take a more active approach to their 401(k) holdings. While this trend can have both positive and negative implications for individual investors, it is also contributing to the growth of the target date fund industry. As the financial markets continue to evolve, it is important for investors to stay informed and make informed decisions about their retirement savings.
- Market volatility leads to increased investor activity in 401(k) holdings.
- Fidelity data shows more than half of recent gains came from trading activity.
- Individual investors can capitalize on market fluctuations or incur higher fees and taxes.
- Target date fund assets under management projected to reach $3 trillion by 2025.
- Stay informed and make informed decisions about retirement savings.
