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More Than Half Of 401(k) Participants Invest In A Single Target-Date Fund

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More Than Half Of 401(k) Participants Invest In A Single Target-Date Fund

Vanguard reports that more than half of 401(k) participants are now invested in a single target-date fund (TDF), compared to only 13% just ten years ago. According to How America Saves 2018, Vanguard’s annual defined contribution (DC) benchmarking report, TDFs have continued to reshape the investment patterns of retirement savers, driving increased diversification and deterring trading. Vanguard researchers estimate that 77% of Vanguard participants will be invested in a single TDF by 2022.

When constructing their own retirement portfolios, about 10% of participants tend to hold extreme allocations (0% or 100% equities).

With the advent of TDFs, three-quarters of all participants now have broadly-diversified portfolios—up from only half ten years ago.

The rate of participants holding concentrated stock positions fell by half during the same timeframe. TDFs also help investors “stay the course” with their investment plans, with only 2% of TDF investors executing a trade in 2017.

“Target-date funds have revolutionized investing for millions of Americans, providing a ready-made, diversified portfolio for retirement savers,” said Martha King, managing director and head of the Vanguard Institutional Investor Group. “Many participants lack the time, willingness, and expertise to build and manage their retirement portfolios, and TDFs offer a professionally-managed investment option at a very low cost.”

With more than $650 billion in TDF assets under management, Vanguard leads the industry in TDF assets and cash flow. According to Morningstar, 54% of all industry TDF cash flow went to Vanguard Target Retirement Funds (TRF) in 2017. With an average asset-weighted cost of 0.13%, Vanguard TRFs cost one-quarter of the industry average1, meaning participants can keep more of their earnings for their future retirement needs.

Smart plan design enhances retirement savings

Over the past decade, plan sponsors have implemented thoughtful plan designs to influence and improve employee retirement savings. The dramatic rise of TDFs—and subsequent portfolio construction benefit—has been driven by the adoption of automatic enrollment, which has tripled in the last decade to nearly half of plans. Plans with automatic enrollment have a 92% participation rate, compared with a participation rate of just 57% for plans with voluntary enrollment—meaning more employees are saving for retirement.

When automatic features were first introduced, many plan sponsors defaulted participants into plans at low rates in an attempt to prevent opt-outs. Half of plans now default participants in at a savings rate of 4% or higher, up from just one-quarter ten years ago.  Not only are sponsors using higher default rates, but of those plans with automatic enrollment, two-thirds have also implemented automatic annual deferral rate increases. Importantly, automatic increases have helped to narrow the spread between deferral rates for participants in voluntary plans vs. automatic enrollment plans to just 0.3 basis points. When both employee and employer contributions are taken into account, the average savings rate of 10.5% has held fairly steady over a 15-year period.

“More people are participating in their employer-sponsored 401(k) plan than ever before, and saving at a healthy rate of about 10%,” said Jean Young, senior research analyst in the Vanguard Center for Investor Research and lead author of How America Saves. “After over a decade of leading this research, it’s gratifying to see meaningful advances in plan design have such a tangible, positive impact on retirement savings for participants.”

With $1.2 trillion in DC assets under management, Vanguard serves as recordkeeper and strategic partner to more than 1,900 qualified plan sponsors—helping them to develop well-designed DC plans for more than 4.6 million participants. Vanguard has long been recognized as an industry leader in DC plan design and services, providing sponsors with the investment options, technology, tools, and research to help prepare participants for retirement.

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GameStop surges more than 18%, other ‘meme stocks’ also rally

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GameStop surges more than 18%, other 'meme stocks' also rally 1

By Sinéad Carew and Lewis Krauskopf

(Reuters) – GameStop and other “meme stocks” mounted a late-day rally on Monday, with shares of the video game retailer climbing nearly 32% at one point on little apparent news.

Shares of the videogame retailer, along with other stocks favored by retail investors congregating in online forums such as Reddit’s popular WallStreetBets, have roared back in recent sessions after a wild ride in which they soared in late January and tumbled early last month.

Along with GameStop, which pared gains to close up 18.3%, cinema chain AMC Entertainment finished up 14.6% and headphone maker Koss added 13.4%.

At one point, GameStop, which closed at $120.40, reached a session peak of $133.99. Its low for the day was $99.97.

Some analysts said a tick higher in short positioning from last week may have provided some fuel for the rally. A short squeeze – in which a flurry of buying forces bearish investors to unwind their bets against the stock – was a key catalyst behind GameStop’s late January run, when it gained as much as 1600% before reversing.

The number of GameStop shares shorted stood at 17.74 million, analytics firm S3 Partners said on Monday, with short interest accounting for about 32.6% of the float, compared with about 26% a week earlier, according to S3 Partners. Short interest peaked at 142% in early January, S3 data showed.

“We’re definitely seeing some of the shorts who came on over the past week probably covering and it’s helping boost today’s rally,” said Ihor Dusaniwsky, managing director of predictive analytics at S3. “Looking at today’s price movement, I’m sure these big red numbers are going to be chasing out quite a few shorts out of their positions.”

GameStop short sellers were down $331 million in mark-to-market losses on Monday, bringing year-to-date mark-to-market losses to $5.1 billion, according to Dusaniwsky.

More than 48 million shares in GameStop changed hands, with volume surpassing the 10-day moving average. So far the stock is up 539% year-to-dated. However, it was still below its Jan.28 peak of $483.

(Reporting by Sinéad Carew and Lewis Krauskopf; Editing by Ira Iosebashvili and Dan Grebler)

 

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Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm

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Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm 2

By Suzanne Barlyn

NEW YORK (Reuters) – Global equities markets rose and the S&P 500 on Monday had its best day since June 5, with investors taking lower U.S. bond yields in stride on optimism over the $1.9 trillion coronavirus relief bill and distribution of Johnson & Johnson’s newly authorized COVID-19 vaccine.

Wall Street’s rise follows a jump in European shares and solid gains on Asian stock markets.

Investor optimism that the J&J vaccine would further lift the economy is “giving a lift to all of the ‘go-to-work’ stocks” that benefit from businesses reopening, said Jim Awad, senior managing director at Clearstead Advisors in New York.

A stabilization of U.S. Treasury yields has also removed pressure from growth stocks, Awad said.

The Dow Jones Industrial Average rose 603.14 points, or 1.95%, to 31,535.51, the S&P 500 gained 90.67 points, or 2.38%, to 3,901.82 and the Nasdaq Composite added 396.48 points, or 3.01%, to 13,588.83.

The much-anticipated COVID-19 relief bill was passed in the U.S. House of Representatives on Saturday, and now moves to the Senate.

The pan-European STOXX 600 index rose 1.84% and MSCI’s gauge of stocks across the globe gained 2.01%.

Emerging market stocks rose 1.71%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.83% higher, while Japan’s Nikkei rose 2.41%.

Reports on manufacturing and factory activity showed strength in many developed economies on Monday, including a three-year high in the United States, which could keep inflation concerns on the radar.

Major sovereign bonds rallied on Monday as markets showed further signs of stabilization after their worst monthly performance in years.

Expectations of economic recovery and rising inflation boosted global benchmark bond yields in February to their biggest monthly rises in years. But the expected run-down of U.S. Treasury balances at the Federal Reserve has held down shorter-dated rates.

Benchmark 10-year Treasury notes last rose 8/32 in price to yield 1.429%, from 1.456% on Monday.

The coronavirus pandemic laid bare weaknesses in the financial system that should be addressed with new rules to prepare for the next shock, Fed Governor Lael Brainard said.

“We should not miss the opportunity to distill lessons from the COVID shock and institute reforms so our system is more resilient and better able to withstand a variety of possible shocks in the future,” Brainard said.

Gold prices rose as the retreat in U.S. Treasury yields helped to bolster its status as an inflation hedge, but a firmer dollar limited bullion’s advance.

Spot gold dropped 0.5% to $1,724.06 an ounce. U.S. gold futures fell 0.45% to $1,720.40 an ounce.

The dollar index rose to a three-week high as investors bet on faster growth and inflation in the United States, while the Australian dollar gained after Australia’s central bank increased its bond purchases in a bid to stem rapidly rising yields.

Bitcoin rose 6.70% to $48,719.02, with Citi saying the most popular cryptocurrency was at a “tipping point” and could become the preferred currency for international trade.

Goldman Sachs has restarted its cryptocurrency trading desk, a person familiar with the matter told Reuters.

U.S. crude recently fell 1.77% to $60.41 per barrel and Brent was at $63.45, down 1.51% on the day on fears that Chinese oil crude consumption is slowing and that OPEC may increase global supply following a meeting this week.

Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm 3

(GRAPHIC – Germany 10-year: https://fingfx.thomsonreuters.com/gfx/mkt/jbyprddzype/Germany%2010-year.png)

(Reporting by Suzanne Barlyn; Editing by Lisa Shumaker and Sonya Hepinstall)

 

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Oil down more than 1% on Chinese fuel demand doubts, OPEC supply concerns

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Oil down more than 1% on Chinese fuel demand doubts, OPEC supply concerns 4

By Laila Kearney

NEW YORK (Reuters) – Oil prices fell more than 1% on Monday as fears that Chinese oil crude consumption is slowing and that OPEC may increase global supply following a meeting this week.

Brent crude settled at $63.69 a barrel, falling 73 cents, or 1.1%, and U.S. West Texas Intermediate (WTI) crude settled at $60.64 a barrel, losing 86 cents, or 1.4%.

China’s factory activity growth slipped to a nine-month low in February, sounding alarms over Chinese crude buying and pressuring oil prices.

“There’s some talk that their strategic reserves are filled up, and so some people are betting against the Chinese continuing to drive oil prices,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Investors were also concerned that the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, would soon increase oil output.

“The worry is that that’s going to end up adding as much as 1.5 million barrels to the market,” said Bob Yawger, director of energy futures at Mizuho. “They have to construct some kind of story to bring those barrels back.”

OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to agreed reductions under a pact with allies, a Reuters survey found, ending a run of seven consecutive monthly increases.

The group meets on Thursday and could discuss allowing as much as 1.5 million barrels per day of crude back into the market.

ING analysts said OPEC+ needs to avoid surprising traders by releasing too much supply.

“There is a large amount of speculative money in oil at the moment, so they will want to avoid any action that will see (those investors) running for the exit,” the analysts said.

A stronger U.S. dollar, which typically moves inversely with oil, also weighed on oil.

Rising COVID-19 vaccinations stirring up economic activity along with a $1.9 trillion coronavirus-related relief package passed by the U.S. House of Representatives on Saturday kept prices from sinking lower.

Oil prices rose earlier in the session on hopes tied to the proposed U.S. stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financial aid to households and small businesses, which will have a direct impact on energy demand.

The approval of Johnson & Johnson’s COVID-19 shot also buoyed the economic outlook.

(Reporting by Laila Kearney; Additional reporting by Bozorgmehr Sharafedin in London, Jessica Jaganathan and Florence Tan in Singapore; Editing by Jonathan Oatis and Lisa Shumaker)

 

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