August usually means long vacations and slow business days, an approach reflected in Alight Solutions’ August 2026 update to its 401(k) index.
Average daily trading activity declined from 0.009% of accounts one year ago to its lowest August level in the index’s history.
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“Average daily net activity was just 0.008% of balances—the lowest August reading across 30 years of available data —and total monthly transfers were 0.08% of starting balances,” wrote Adam Vredeveld, an Alight senior client manager for defined contribution, in an email to PLANADVISER. “The defining feature was the unusually low volume of activity, not an unusually defensive trading direction.”
Fixed-income investments were favored on 14 of the month’s 21 trading days, accounting for 67% of net trading activity, according to the index. Last August, fixed income was also favored for most of the month—18 out of 21 days.
“From a macroeconomic perspective, the modest preference for fixed income among those who traded may reflect ongoing uncertainty around interest rates, inflation and economic growth,” wrote Vredeveld.
Bond funds led net trading inflows among asset classes in August (49%), followed by stable value (22%) and money market funds (12%), according to Alight. Outflows came mostly from large U.S. equity (37%), target-date funds (24%) and company stock (19%).
Target-date and large-cap U.S. equity funds remained the largest holdings in participant portfolios, representing 31% and 29% of balances, respectively, while large U.S. equity allocations increased to 29%, up from roughly 20% in the late 1990s. Together, those two categories now account for about 60% of all 401(k) assets in the index, up from roughly 40% to 45% 20 years ago.
“A key driver has been the widespread use of target-date funds as qualified default investment alternatives. As automatic enrollment has become more common, more participants have entered plans through target-date funds, helping drive their steady growth as a share of retirement assets,” Vredeveld wrote. “We expect target-date funds and large U.S. equities to continue representing the core of participant portfolios, although the exact percentages will naturally fluctuate with market performance and participant behavior.”
According to the index, 51% of August contributions—$541 million—went to target-date funds, and 23% ($242 million) went to large U.S. equity funds, followed by international equity funds at 7% ($76 million).
“Today, many participants are invested in target-date funds, which automatically rebalance portfolios and gradually adjust risk as participants approach retirement,” Vredeveld wrote. “The widespread adoption of automatic enrollment has played an important role. Many workers are automatically enrolled into a retirement plan and defaulted into a target-date fund shortly after becoming eligible.”
