- Posted August 04, 2011
- Tweet This | Share on Facebook
Personal Finance Default fears drove 401(k) investors from stocks Fear, uncertainty unsettle workers
By David Pitt
AP Personal Finance Writer
Workers with 401(k) accounts, fearing another drop in their savings similar to 2008, shifted investments from stocks to less volatile bond funds in the days leading up to Tuesday's debt ceiling vote.
Aon Hewitt, which tracks the accounts of 4.7 million workers, said the volume of money moved from stocks to fixed-income funds since last Monday was at the third-highest level since it began tracking data in 1997.
The volume of assets traded on Thursday exceeded $900 million. On a typical day, around $300 million to $400 million is traded in the 401(k) accounts Aon Hewitt tracks.
Volume remained high on Monday, reaching $862 million as Congress moved closer to reaching a compromise.
Last week, 95 percent of the assets moved from stocks to fixed-income investments, primarily stable value funds.
The trends show that workers, many burned in the last economic downturn and stock market meltdown, have little patience for leaving their money vulnerable again.
It was not unusual for 401(k) accounts to lose a third of their balance as the market plunged in 2008 and hit bottom in March of 2009.
"More fear and uncertainty had folks running to the sidelines rather than wanting to weather another one of those downturns," said Pam Hess, Aon Hewitt's director of retirement research.
After the market bottomed in 2009, about 6 percent of 401(k) assets in the accounts Aon Hewitt monitors moved from stocks to bond funds. Average stock exposure declined from about 70 percent to 50 percent of the assets, Hess said.
Only about 1 percent of those assets moved back into stocks, which means many investors lost out on the market's rise. The S&P 500 has nearly doubled since early 2009.
Published: Thu, Aug 4, 2011
headlines Detroit
headlines National
- ABA Legislative Priorities Survey helps members set the agenda
- ACLU and BigLaw firm use ‘Orange is the New Black’ in hashtag effort to promote NY jail reform
- Judge gave ‘reasonable impression’ she was letting immigrant evade ICE, ethics charges say
- 2 federal judges have changed their minds about senior status; will 2 appeals judges follow suit?
- Biden should pardon Trump, as well as Trump’s enemies, says Watergate figure John Dean
- Horse-loving lawyer left the law to help run a Colorado ranch