With Markets Showing Signs of Life, 401(k)s Move Back to Stocks

In another sign of an impending economic turnaround, 401(k) investors are returning to stocks in droves, the latest research indicates.
"Users appear to be encouraged by the improving stock market during the second quarter," said Jim McCool, senior vice president for Charles Schwab Corporate Services, which reviews investor activity for self-directed 401(k) participants. "We saw renewed interest in individual equities, reflected by a 9% increase in asset flows. Overall trading activity increased as well, reaching its highest level since the first quarter of 2002."
The Hewitt 401(k) Index, which tracks the daily transfer activity of nearly 1.5 million employees, reports similar good news. Employees with stock investments reached 61.7%, a 5.1% increase over levels posted in February. Further, since March, investors transferred more than $1.2 billion in assets out of stable value and bond funds into stock investments.
With all the rosy reports, and benefits enrollment season here, now is an opportune time for plan sponsors to encourage enrollment in 401(k) plans. "For more than half of the employers, the 401(k) plan is the primary retirement plan available to employees," says Hewitt Investment consultant Lori Lucas. "As such, it is critical for employers to find ways to ensure that eligible employees use the plan."