Schwab Report: Self-Directed 401(k) Balances Hold Steady; Millennials Allocate More to ETFs and Cash Than Gen X, Boomers

SAN FRANCISCO–(BUSINESS WIRE)–According to Charles Schwab’s SDBA Indicators Report^TM, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), Millennials allocated a larger percentage of their portfolios to ETFs and cash than did other generations during the third quarter of 2019, while mutual funds remained the largest holding in the accounts of all generations and Apple the top overall equity holding.

SDBAs are brokerage accounts within retirement plans, including 401(k) and other types of retirement plans, which participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings. Gen X made up approximately 42% of SDBA participants, followed by Baby Boomers (39%) and Millennials (13%).

According to the Schwab data, mutual funds continued to hold the highest percentage of participant assets, with Baby Boomers allocating approximately 39% of their portfolios to them, followed by Gen X at 36% and Millennials at 34%. Equities were the second-largest allocation for all portfolios, with Baby Boomers and Gen X allocating approximately 28% of their portfolios to them, followed by Millennials at 25%.

Millennials continued to allocate more to ETFs (24%) than did Gen X (20%) and Baby Boomers (17%), and they also held more cash (16%) than other generations (Gen X had 14% followed by Boomers at 12%). Baby Boomers held approximately 4% of their portfolios in fixed income, followed by Gen X (1%) and Millennials (0.8%).

U.S. broad funds were the most popular ETFs. All three generations held these three funds among their top ETF holdings: Schwab U.S. Broad Market ETF, SPDR S&P 500 ETF and Vanguard Total Stock Market ETF. Additionally, all three generations continued to hold the Schwab S&P 500 Index Fund as their top mutual fund holding, followed by the Schwab Total Stock Market Index Fund.

Equity Holdings

The following chart shows the top ten equity holdings as a percentage of assets held in equities across all generations:

Report Highlights

• The average SDBA balance for all participants in the third quarter of 2019 was $276,929, nearly identical to the $276,547 from the previous quarter and 1% above the average balance from the third quarter of 2018 ($275,362).
• Baby Boomers had the highest SDBA balances at an average of $394,064, followed by Gen X at $213,018, and Millennials at $68,756.
• Of participants using an advisor to manage their SDBA, 22% were Boomers, 21% were Gen Xers and 15% were Millennials.
• On average, Baby Boomers held more positions in their SDBA than other generations (11.4 vs. Gen Xers: 9.6, Millennials: 7.1).
• Mobile trades were equally popular among Millennials and Gen X, with 22% of each generation using that method, compared to 16% of Baby Boomers.
• SDBA users averaged 6.7 trades in the third quarter (Boomers: 7.3, Gen Xers: 6.7, Millennials: 6.1).

About the SDBA Indicators Report ^TM

The SDBA Indicators Report includes data collected from approximately 142,000 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 2019, and can be found here, along with prior reports.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube, and LinkedIn.

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by visiting Schwab.com or calling 800-435-4000. Please read the prospectus carefully before investing.

Disclosures:

The securities shown are for informational purposes only and are not a recommendation to transact in any security.

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

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.

Schwab Personal Choice Retirement Account® (PCRA) is offered through Charles Schwab & Co., Inc. (member SIPC), the registered broker/dealer, which also provides other brokerage and custody services to its customers.

(1219-91YJ)

Contacts

Mike Peterson

Charles Schwab

330-908-4334

mike.peterson@schwab.com

Mary Chung

Lansons Intermarket Communications

212-754-5479

mchung@intermarket.com