Author Topic: percent of daily US stock market activity from retirement account contributions  (Read 3339 times)

tct

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Was hoping someone here could point me to some statistics that show the changes or makeup of US stock market in terms of how much of new investments are related to retirement account contributions such as 401k, etc. And how this has changed over time. I googled this, but could not find the information I was looking for.

TheAnonOne

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Was hoping someone here could point me to some statistics that show the changes or makeup of US stock market in terms of how much of new investments are related to retirement account contributions such as 401k, etc. And how this has changed over time. I googled this, but could not find the information I was looking for.

If the goal is to see if the retirement accounts are mass changing the market. I doubt it. According to most articles, only about half or less participate at all in 401k plans. Some people don't have one.... Even less that do, put any significant amount into it...

Cromacster

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2015 Report from Vanguard stated that assets in defined contribution plans is over 6.5 trillion dollars* (2015).  Which is roughly 30% or so of the estimated value of the US stock market* (Or 10% of the world market value)

*Note the vanguard numbers are from 2015, but the most recent stock market value I can find is from 2013.


http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/07/02/your-401-k-plan-may-provide-a-false-sense-of-security

https://institutional.vanguard.com/iam/pdf/HAS15.pdf

https://en.wikipedia.org/wiki/Stock_market#Size_of_the_market

Edit: updated link with more recent vangaurd source
« Last Edit: February 17, 2016, 10:21:21 AM by Cromacster »

NoStacheOhio

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http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/07/02/your-401-k-plan-may-provide-a-false-sense-of-security


The conclusion bugs me. The stated goal of 401k plans was as a supplemental form of (tax deferred) savings for high earners. Somewhere around the 80s-90s we just collectively decided it was a good idea for everyone.

Cromacster

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http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/07/02/your-401-k-plan-may-provide-a-false-sense-of-security


The conclusion bugs me. The stated goal of 401k plans was as a supplemental form of (tax deferred) savings for high earners. Somewhere around the 80s-90s we just collectively decided it was a good idea for everyone.

Yea, that's essentially what happened.  I updated my post with new links to avoid derailing this into a discussion about the validity of the 401k etc etc.

tct

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Thanks for the links Cromacster. The vanguard report confirms what I suspected. That market participation is increasingly made up of these "defined contribution plans". Does the  possibility exists that all other forms of market participation will eventually be dwarfed by this type. The report also indicated a heavy trend towards investing in target index funds. Putting these two trends together,  how would the market(and individual companies) behave when most of the market participation is a result of payroll deductions automatically invested in market index funds with no thought given to value of individual companies, etc. It seems that the incentive of the company to return value to the shareholders is somewhat lost in this scenario.

Gone Fishing

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I've never tracked it or tried to research historical movements, but it sure seems like the market goes up a bit on common payroll dates (esp. for higher compensated workers) like the 15th and 30th.  Maybe someone has an easy way to back test this theory...

tct

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I've never tracked it or tried to research historical movements, but it sure seems like the market goes up a bit on common payroll dates (esp. for higher compensated workers) like the 15th and 30th.  Maybe someone has an easy way to back test this theory...

Interesting. I've observed the same behavior for the most part as I've tracked my contributions to 401k over last few years. I'm always excited to see the market go down as I accumulate more shares. However, to my disappointment, the market tends to be up on the days my automatic 401k contributions are invested.

bacchi

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Remember that the $6T was accumulated over 30 years.

52 million Americans have a 401k.

https://www.ici.org/policy/retirement/plan/401k/faqs_401k

The average American invested $2733 in her 401k in 2013.

http://www.zerohedge.com/news/2013-02-14/average-american-contributed-2733-their-401k-2012

That's $142B put into the market each year; or, in other words, less than 1% of the total US market is additional 401k money (excluding growth) per year.

Metric Mouse

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I've never tracked it or tried to research historical movements, but it sure seems like the market goes up a bit on common payroll dates (esp. for higher compensated workers) like the 15th and 30th.  Maybe someone has an easy way to back test this theory...

Interesting. I've observed the same behavior for the most part as I've tracked my contributions to 401k over last few years. I'm always excited to see the market go down as I accumulate more shares. However, to my disappointment, the market tends to be up on the days my automatic 401k contributions are invested.

Here I was pretty sure that was just me...

Have you run the numbers on how many fewer shares you'll get over your working career? And what the difference those few shares would make in your portfolio value?  After I ran a few numbers I became less disappointed; also it's a good reminder that DCA blindly doesn't beat having cash on hand to toss at the market when it dips.