The latest Charles Schwab Self-Directed Brokerage Account (SDBA) Indicators report shows more self-directed investors are allocating retirement asset to exchange traded funds.
The report, which highlights trends from approximately 170,000 retirement plan participants who currently have balances between $5,000 and $2 million in their Schwab Personal Choice Retirement Account, shows self-directed investors allocated 14% of their total retirement portfolios to ETFs at the end of the first quarter. That is up 200 basis points from a year earlier, according to Schwab data.
“According to the Schwab data, exchange-traded funds were the only investment category to see an increase in net asset allocation year-over-year. Asset allocations in mutual funds held steady in the quarter, comprising 41 percent of overall portfolio allocation. Allocations in individual equities remained unchanged at 25 percent while SDBA participants decreased their cash positions to 18 percent,” California-based Schwab said in a statement.
Data indicate 30% SDBA ETF assets were allocated to large-cap equity funds followed by 17% to international stock ETFs. Information Technology (23%) was the largest sector holding for individual securities, followed by Financials (14%) and Consumer Discretionary (13%). Utilities represented the smallest allocation, accounting for just two percent of participants’ portfolios, according to Schwab.
The utilities sector is the best-performing sector in the S&P 500 this year while consumer discretionary is the worst. [Discretionary ETFs Show Signs of Life]
Top ETF holdings in the Schwab Personal Choice Retirement Account (PCRA) include the SPDR S&P 500 ETF (NYSEArca: SPY), Vanguard Total Stock Market ETF (NYSEArca: VTI), Schwab U.S. Broad Market ETF (NYSEArca: SCHB) and the SPDR Gold Shares (NYSEArca: GLD).
Other allocation breakdowns among ETFs for PCRA 6% apiece to mid-caps and commodities and 7% to small-caps, according to Schwab data.
Nearly 52% of PCRA participant are 50 years old and up while 30% are between 40 and 49 years old.
Three out of five investors want ETFs in their 401(k) plans with 37% saying they believe ETFs would give them “the ability to invest in market segments that are more accessible than mutual funds,” according to a separate Schwab study released last week. [Investors Want More ETFs]
Earlier this year, Schwab Retirement Plan Services launched a full-service 401(k) program based on low-cost exchange-traded funds.
Schwab Retirement Plans Services is making 80 ETFs from 11 providers available in its new 401(k) ETF platform. In addition to Schwab ETFs, plan participants can choose from ETFs offered by ETF Securities, First Trust, Guggenheim Investments, Invesco PowerShares, iShares ETFs, PIMCO, State Street Global Advisors, Van Eck Global, Vanguard and United States Commodity Funds. [Schwab Launches ETF 401(k) Effort]
Tom Lydon’s clients own shares of GLD and SPY.