The author is a columnist for Reuters who writes about
trends in retirement and aging. He writes the syndicated column
"Retire Smart" and edits www.RetirementRevised.com. The
opinions expressed here are his own.
By Mark Miller
NEW YORK Aug 18 Past performance is no
guarantee of future results, as the saying goes. But a new
Fidelity Investments [FIDIN.UL] analysis of what's happened to
retirement investors' portfolios since the 2008-2009 market
crash is worth considering if you're tempted to pull money off
the table during the market's current volatility.
The big message: Investors who held on tight through the
harrowing 2008-2009 crash have been richly rewarded since
Fidelity looked at the performance of 7.1 million 401(k)
accounts, comparing returns for investors who made changes to
their portfolios during the 2008-2009 market crash up through
June 30 this year - a point when the market was on an upswing
preceding the steep drops and volatility that began in late
The key findings:
*Participants who changed their equity allocations to zero
percent between Oct. 1, 2008, and Mar. 31, 2009 and stayed out
of stocks through June 30 this year saw an average increase in
account balance of only 2 percent.
*Participants who exited stocks but then returned to some
level of equity allocation after that market decline saw
average account balance increases of 25 percent.
*Investors who stuck it out with a continuous asset
allocation strategy that included stocks had an average account
balance increase of 50 percent.
Fidelity also looked at participants who stopped
contributing to their 401(k)s during the 2008-2009 crash; they
experienced an average increase in their account balances of 26
percent through the end of the second quarter, compared with 64
percent for those who kept making regular contributions.
Only a very small percentage of Fidelity's 401(k) investors
withdrew entirely from the market. Less than 1 percent of
account holders (0.8 percent) bailed on all their equity
investments during the 2008-2009 crash and stayed out entirely,
according to Beth McHugh, vice president of market insights at
Fidelity. And among investors who had been actively
contributing before the crash, only 1.4 percent stopped doing
so as a result of the downturn.
Among those who reduced their equity contribution to zero
at some point during the period measured, half were over age
"Often there's a lot of speculation about participants
taking money out of the market, but inertia does take hold as a
result of the automatic nature of many 401(k) plans," she
It's true that most workplace retirement savers tend not to
manage their accounts actively - behavior that has accelerated
as more plans add automatic enrollment, automatic contribution
levels and target date funds that hold investor accounts to
specific equity allocation levels tied to their proximity to
As of June 30, 98 percent of Fidelity plan sponsors offered
a lifecycle investment option, and 52 percent of participants
were using them. Fidelity says 46 percent of plan participants
are 100 percent invested in target date funds.
TODAY'S MARKET RESPONSE
During the market's recent volatility, McHugh says Fidelity
saw a 50 percent spike in telephone call volume to its service
centers during the market's worst days last week. "Customers
have questions and concerns, and they wanted to be able to get
through to us by phone," she says. "But call volumes and
transactions have gone back to a normal level since then."
(Editing by Beth Gladstone)