401(k) Investors Stick with Equities

The lagging stock market hasn’t turned investors away from equity investments, according to new research from the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). In a five-year examination of 401(k) investment activity, asset allocation remained 70% unchanged.
Among all 401(k) participants (14.6 million) in the 2001 EBRI/ICI database, almost 70% of plan balances are invested directly or indirectly in stocks, despite the fact that, overall, U.S. equity markets declined by about 12% in 2001. Asset allocation in plans was virtually unchanged over the 1996-2001 period, with about 70% of 401(k) accounts invested in the equity market at year-end 2001. EBRI finds participants allocated 48% to equity funds, 17% to employer stock and 8% to balanced funds.
Most 401(k) account balances are small, EBRI found. About 11% of participants had balances exceeding $100,000, while 45% had less than $10,000. However, researchers noted, many workers have balances with former employers or have rolled amounts from former employer plans into IRAs, which are not included in the analysis.