What Percentage of America Owns Stocks?
According to a 2016 Gallup poll about half of American adults own stocks and about half don’t. This is down since 2007 when around 65% of American adults owned stocks.
This means, although percentages change each year, counting HSAs, 401(k)s, IRAs, private investing, the employee’s who receive shares as benefits, and all other investment types: only 1 in 2 American adults are actively invested in the market.
This may seem high or low depending on your perspective, but as noted above, this is less than in past years. This is unfortunate in many ways. 65% of America owned stocks at the height of the 2007 Financial Crisis, while only 52% own stock today. Meanwhile, the market has rallied since the crash. That means those in the market made a steady return, while those who exited the market after the crash lost money, and those who never entered or reentered haven’t gained anything.
How The Stock Exchange Works (For Dummies)
FACT: According to inequality.org the richest 1% of Americans hold about 35% of all privately held wealth in the United States. Meanwhile, according to a 2014 article in the NY Times, the bottom 90% hold 73% of all debt. These numbers differ by source and date, but specifics aside, the point is, the cards are stacked against you unless your last name is Buffet or Icahn. By not investing in “tax advantaged vehicles” like a 401(k) you only make joining the 1% (or even the 10% without the bulk of debt) harder. You could potentially lose your pension, but you could manage your own private investments, retirement account, or HSA and take your risk and rewards into your own hands while enjoying a tax benefit. Even for those who want to “sit in cash” and not take risks, I am of the opinion that every tax paying American should learn the basics of the market or find a fiduciary they trust. If you don’t actively invest your money in the physical world like a small business or real estate, you might fail to utilize the market or tax-advantaged savings accounts. This would leave you facing inflation and measly bank interest returns. This may leave you taking the brunt of a crash like we had in 2000 and 2007. Many of the 50% of Americans who don’t own stock could potentially benefit from owning it, but this isn’t the only option, and it carries risk.
The Bank Vs. Tax-Advantaged Vehicles
Today banks pay next to nothing in interest, the only way to offset inflation in the long term is the market. So while investors always take on risk for that interest, and while a 2007-style crash remains a possibility, Americans not invested in the market may want to consider the generous tax benefits of a retirement account or 401(k).
Learn more about the basics of investing, 401(k)s / IRAs, and HSAs by clicking on the links. Here is the simplest summary I can muster. Please note that the amount you can fund and the tax implications differ by factors of income, employment status, etc.
- 401(k) is a retirement account that lets you invest the funds. Tax-free in, but you pay taxes when you take money out. This has higher limits and benefits those with higher incomes. To get a 401(k), you must be offered one through an employer; you can use a solo 401(k) if you are self-employed.
- IRA is a retirement account that lets you invest the funds. Roth IRAs are taxed going in, but you don’t pay taxes on the other end, traditional IRAs work more like a 401(k). An IRA has lower limits and can benefit those with lower incomes. See IRA vs. 401(k) – What’s the Difference?
- HSA is a health savings account that is tax-free in and tax-free out and lets you invest. HSAs carry great benefits, but only for those who have the money to fund them. See our Guide to HSAs.
TIP: Above are the common tax-advantaged vehicles, there are also 403(b), 457 plans, and the Thrift Savings Plan for example. Also, not all vehicles can be funded at the same time. For example, you can’t max out your 401(k) and your IRA.
From the Author’s Perspective: An Example
Every year I max out my 401(k) and HSA and take advantage of matching employer contributions in line with my income and health plan. Each year I make a return on my money and avoid paying the top tax rate on the part of it that I put in my HSA. If that seems unfair, it is, but only partially. I’m taking a risk and, if I withdraw the money before retirement, I have to pay fees. I will also need to pay taxes when I take the money out. Taking advantage of ALL tax benefits you are eligible for, is going to put you in a much better place than you would be otherwise. Apparently, half of Americans are not taking advantage of this, and even bearing in mind that 1/2 of America doesn’t pay income taxes, this still tells me some people who could be improving their financial standing aren’t doing so.
401(k) Contribution Challenge – Investing Basics | Fidelity.
FACT: A majority of Millennials, the generation of people who in 2015 were between the ages of 18 and 34, do not invest in the stock market. When I use the term “stock market,” I include buying individual company stocks, bundles of stocks through mutual funds or exchange-traded funds, and contributing to retirement accounts such as 401(k)s. This has far-reaching negative side-effects. The longer you have to invest in the market, the better your returns will be, and the better you can absorb the inevitable “bubble pops.” Please learn about bubbles and dollar cost averaging before you go putting a lump sum into a popular ETF.
Direct or indirect, this makes sense. However, owning stocks means little I own 10 shares of IBM. So #&*$!# What!
Well owning 10 shares of IBM means that trickle down economics works a little better for you than it does for the person who doesn’t own 10 shares of IBM. If everyone has ownership of capital assets that appreciate in value, then capitalism is by its nature more distributive.
If you have a broad portfolio creating income, and the rest of your income is labor, then when politicans give tax breaks to corporations, cut assistance, and suppress wages, your capital grows at a rate faster than being purely labor.
Capital generally grows faster than income from labor (that is, ROI on assets like stocks generally outpaces the rising of wages against the buying power of the dollar), so “the many” being in capital assets is vital to offsetting the wealth gap over time (otherwise the system naturally compounds and suppresses the many and favors the few; natural mechanics of capitalist markets).
We live in a capitalist society, so it is vital to ensure that the average person has a cut of our publicly traded capital assets. We don’t need to “give” this to people (although I personally think it would be a good move), we can simply facilitate it better by focusing on HSAs, 401ks, IRAs, pensions, companies offering stock, etc.
50% is good, we need to do better. The capitalist ruling class can build walls and fences, they can hire body guards, they can do whatever they want, but the walls will close in on them if wealth disparity gets too great. I don’t see how that house of cards doesn’t implode if we don’t find a way to better distribute capital assets. The current stock market is a free enough market, if we can leverage that, then we don’t have to wait until the house of cards collapses, we can, you know, fix the problem before it all goes to heck.
So far not so good, but you never know what the future will bring in a Democratic Republic. We have the power to make change, we just haven’t done that well [by some measures] so far [by other measures we have done great].
The “half of all Americans”. Does this include children who are too young to own stock?
I should have made that clear, it is American adults. So about half of all American adults own stocks.
Even though half of adults own stock to further refine how few actually do consider this: only 20% of households own stock. That source is from Bem Bernanke’s book (he was Fed chairman during the crisis). So the adults that own stocks are most likely partnered together.
This means that 80% of households do not own any stocks. If they happen to have kids it means their kids are learning nothing from their parents about investing. So the ignorance continues from generation to generation.
Thank you so much for that clarification! I did not think of it that way.
So if most of the 50% are partnered, then it is more like 20% – 30% of households which own stocks.
That paints a more dreary picture than I had thought. I’ll do some more research here. Thanks!
Maybe not everyone WANTS to invest in the stock market. Particularly after the financial crisis in 2009 and the fear surrounding that event and subsequent months and years. Perhaps some people decided it was better to invest in other vehicles such as the money market, credit unions, bonds, real estate, precious metals, etc. Stocks aren’t the only place to invest one’s money. Maybe the larger issue is something else. Financial literacy and discipline are very important regardless of income. Good financial choices usually generate good returns. Working on ways to spread financial literacy may be a better way to spend time and energy rather than focusing on who doesn’t have what.
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