When the stock market dropped on August 21, 401(k) participants began moving their money from equities into fixed income, according to the Aon Hewitt 401(k) Index.

The Aon Hewitt index is based on data collected from 1.5 million 401(k) participants in plans that have more than $150 billion in collective assets. It tracks daily transfer activity in 13 asset classes, providing insight into how individual market events affect 401(k) plan participants’ confidence in the stock market and their investment decisions.

The index for last month shows that trading activity among 401(k) participants on August 21 was two times the normal level, while trading activity on August 24 was seven times higher than normal. The trading movement on those two days was out of stocks and into fixed income, according to Aon Hewitt.

The Dow Jones Industrial Average dropped 531 points August 21, and plunged 1,089 points early on August 24 before ending the day down 588 points.

Rob Austin, director of retirement research at Aon Hewitt, encourages employers to remind their plan participants that they are in it for the long haul.

“You will have days that are up and down, but don’t have a knee-jerk reaction. Don’t be caught on the sidelines trying to time it before it goes back up. It is better to ride it out, especially when they are paper losses. Nothing counts until you make a trade,” he says.

Austin recommends that plan participants set aside a time once a quarter or twice a year where they evaluate their portfolio and rebalance as needed, based on the risk they want to take and their financial goals in retirement.

Paula Aven Gladych is a freelance writer based in Denver.



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