Investors shifted their 401(k) plan allocations away from stocks to bonds and cash in September, according to an analysis by Alight, a retirement plan administrator — a behavior that could be financially perilous, depending on their rationale.
Overall account trading among 401(k) investors was low during the month, signaling that most people weren’t actively moving money or trying to time the market, said Rob Austin, head of thought leadership at Alight.
“[But] when people did make trades, they moved from equities to fixed income,” Austin said. “There’s this flight to bonds, money market and stable value [funds].”
During almost every day of the month, net trading favored bonds, stable value funds or money market funds, according to Alight’s analysis, which was based on 401(k) trading activity of more than 2 million people with more than $200 billion in total assets. These are more conservative asset classes relative to stocks.
Investors showed “a clear preference for safer options,” even as the stock market posted record highs, the analysis said.
Specifically, 20 out of 21 days saw net 401(k) money flowed to fixed income, Alight found.
Bond, stable value and money market funds accounted for 82% of all investor inflows in September: Bond funds captured 39% of fund inflows, while 25% of net investor money flowed to stable value and 18% to money market funds, Alight found.
By contrast, 38% of outflows came from large-cap U.S. stock funds, and 28% flowed out of company stock and 12% from small-cap stock funds, its data shows.
The analysis doesn’t indicate what drove the exodus from stocks to bonds.
Investors may have been concerned about the trajectory of the U.S. economy in September — as the prospect of a government shutdown became more likely and as the job market showed continued signs of weakness, for example — and were “trying to tighten their belts,” Austin said.
“The shift from equities to fixed income could hint at some hedging against market volatility,” Austin said.
Financial advisors generally recommend investors don’t try to time the market, a behavior they say can lead to bad financial outcomes like buying stocks when prices are high and locking in losses by selling at a low point.
“Keep in mind that nobody can really time the market well, and it’s best to have a long-term focus on what you’re trying to accomplish,” Austin said.
There may be a rosier explanation, though.
The S&P 500 U.S. stock index has gained about 13% in 2025 as of around noon ET on Monday. The shift to bonds may indicate investors are rebalancing to keep their asset allocations from getting too stock-heavy, Austin said.
