Retirement investors who invest some 401(k) retirement assets through a self-directed Charles Schwab brokerage account saw their average account balances drop 3.55% in the third quarter of 2022, that ended September 30, compared to Q2 2022, and balances are down 19.84% year-over-year, new data shows.
The average account balance across all participant accounts finished at $273,412 for Q3, the Charles Schwab SDBA Indicators Q3 2022 Report found. That is lower than the $283,485 average value at the end of Q2 2022 and far lower than the average balance of $341,068 for 2021.
“Stocks rallied early but retracted their gains to close out a third consecutive quarter of negative returns; from its August 16 high to September 30, the S&P 500 Index declined nearly 17%,” the report’s asset balance summary stated.
SDBAs are brokerage accounts within retirement plans, including 401(k)s and other types of retirement plans, that participants can use to invest retirement savings in individual stocks and bonds, as well as exchange-traded funds, mutual funds and other securities that are not part of their retirement plan’s core investment offerings.
Markets retracted for a third consecutive quarter “amid high inflation, increasing interest rates, rising recession risks, and ongoing geopolitical unrest,” a Schwab press release stated.
Equities remained the largest holding for participants in Q3 2022, at 33.43% of assets, with mutual funds at 28.4% and exchange-traded funds at 20.96%, the report found. Cash and equivalents comprised 14.74%, with fixed Income just 2.51%, data showed.
“Overall, participant holdings remained similar to last quarter, with an increase in fixed income,” stated the report asset balance summary.
The largest equity sector holding was information technology at 28.8%, the report found. The top equity holdings remained Apple at 12.5%, Tesla 9.6%, Amazon 4.8% and Microsoft 3.2%.
Investors allocated the largest portions of fund flows to large-cap stock funds at 33.7%, followed by 19.7% for taxable bond funds and international funds at 12.9%, according to Schwab.
Additional report findings:
The SDBA Indicators Report includes data collected from approximately 186,000 retirement plan participants who currently have balances between $5,000 and $10 million. Data is extracted quarterly on all accounts that are open as of quarter-end and meet the balance criteria.
FAQs
The average account balance for self-directed brokerage accounts (SDBAs) closed down 20.6% year over year at the end of 2022 at $280,099, although that was up 2.45% from the third quarter of 2022, according to Charles Schwab's SDBA Indicators Report.
What is the average balance in a Schwab brokerage account? ›
WESTLAKE, Texas-- According to Charles Schwab's SDBA Indicators Report, an industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts (SDBAs), the average account balance across all participant accounts finished at $287,769 for the third quarter of 2023, up by ...
Should I do self-directed brokerage? ›
Self-directed investment accounts have the lowest fees and give you the most freedom, but the risks are higher. A safer choice is to hire a financial advisor and let them guide your investment strategy. Robo-advisors are somewhere in the middle, allowing investors to automate their trades.
What is a 401k self-directed brokerage account? ›
A self-directed brokerage account expands your retirement offering beyond a preselected investment lineup. It gives participants more flexibility to select the individual investments in their plan.
Should I keep more than 500000 in a brokerage account? ›
They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.
What is the average return on a brokerage account? ›
The average stock market return is about 10% per year, as measured by the S&P 500 index, but that 10% average rate is reduced by inflation.
How much cash should you keep in a brokerage account? ›
A general rule of thumb is that cash or cash equivalents should range from 2% to 10% of your portfolio, although the right answer for you will depend on your individual circ*mstances.
Should I keep all my money in a brokerage account? ›
As a general rule, unless you can leave the money invested for around two to five years, it should be in savings instead of a brokerage account. Otherwise, the risk is too high that you'll end up buying and selling at a bad time before you make enough profits to break even.
What are the disadvantages of self-directed IRA? ›
Cons of a Self-Directed IRA
That's something you don't typically face with a standard IRA holding stocks, bonds or funds. Additionally, there's a higher potential for fraud or misuse of funds without proper due diligence, and the lack of professional guidance could lead to risky investment decisions.
What is the downside to a brokerage account? ›
Brokerage accounts don't offer all the services that a traditional bank offers. Brokerages might not offer additional products such as mortgages and other loans. Brokerages may not have weekend or evening hours.
A self-directed retirement account can give you freedom of choice with your retirement savings, but it comes with obvious risks. This is an option for people who are sure that they can beat the professionals and are willing to bet their retirement savings on it.
Can you withdraw from a self-directed brokerage account? ›
No worries - J.P. Morgan Self-Directed Investing is a reliable broker that lets you access your funds any time. You can use only bank transfers to withdraw funds.
Do you pay capital gains on self-directed 401k? ›
The Solo 401k offers considerable tax advantages, including the ability to grow investments tax-deferred. This can be extremely beneficial in avoiding the capital gains tax on stocks, bonds, mutual funds, and alternative assets.
Why should no one use brokerage accounts? ›
If the value of your investments drops too far, you might struggle to repay the money you owe the brokerage. Should your account be sent to collections, it could damage your credit score. You can avoid this risk by opening a cash account, which doesn't involve borrowing money.
How much is too much in a brokerage account? ›
Since you can expect a good return over time if you make informed choices, you can't really have too much money in your brokerage account. After all, you want as much money as possible earning the highest possible returns. This is different from, say, keeping your money in a high-yield savings account.
Do millionaires use brokerage accounts? ›
Millionaires use brokerage accounts for low-cost index funds. “Buying and holding index funds in a brokerage account, it's possible to keep and grow wealth over the long term,” according to Business Insider.
What is the average size of a Schwab account? ›
Taking data from its Preferred Choice Retirement Accounts (PCRAs), a self-directed brokerage account offered within defined contribution retirement plans, Charles Schwab has found that, for the first quarter of 2022, plan participants who work with financial advisors had an average balance of $535,354–nearly twice as ...
What is considered high net worth for Charles Schwab? ›
"High-net-worth" is defined as having $5 million or more in assets.
What is the minimum balance for a Charles Schwab brokerage account? ›
The Schwab One brokerage account has no minimum balance requirements, no minimum balance charges, no minimum trade requirements, and there is no requirement to fund this account when opened with a linked Investor Checking account.
How many funds should I have in my brokerage account? ›
A commonly cited rule of thumb is to own between 10 and 20 mutual funds, but the actual number will vary depending on your individual circ*mstances. Too many funds can lead to unnecessary over-diversification and overlap. There's really no point in owning, say, two index funds that invest in the same index.
