Americans Making Active Investments: How Many Yearly?

A large proportion of Americans make active investments each year, with the majority choosing to invest in the stock market. In 2024, 62% of American adults invested in the stock market, a figure that has been steadily increasing since 2014. This figure includes those who invest indirectly through mutual funds, index funds, or retirement accounts, as well as those who invest directly by purchasing individual stocks. While stock market investment is the most common form of active investment for Americans, they also invest in other assets such as real estate, gold, bonds, and cryptocurrencies.

Stock market investments

The majority of Americans hold stocks indirectly through mutual funds, index funds, or retirement accounts such as 401(k)s. A smaller percentage hold stocks directly, meaning they purchase individual shares. In 2022, 58% of U.S. families (about 72 million) held stock, with 21% (around 26 million) holding stock directly. Direct stock ownership has returned to pre-2008 levels, while total stock ownership has surpassed that level.

Stock ownership is strongly correlated with income, with the top 1% of Americans holding 50% of stocks by value, and the bottom 50% holding just 1%. This disparity is also reflected in the racial breakdown of stock ownership, with white Americans owning 89% of stocks, while Black and Hispanic Americans own 0.7% and 0.6% respectively, despite making up 13.8% and 18.9% of the population.

Despite the risks, investing in the stock market can be a great way to save for retirement, with an average annual return of about 10%. For those new to investing, it is recommended to build a diversified portfolio, invest regularly, and hold investments for at least five years to weather market volatility.

Mutual funds

ICI's research also found that equity funds were the most commonly owned type of fund, and that mutual fund shareholders come from all age and income groups, with more than two-thirds earning less than $150,000. Baby Boomers hold the largest portion of mutual fund assets, with 51% of households' mutual fund assets in their possession. This is due in part to the fact that they have had more time to accumulate savings through employer-sponsored retirement plans, individual retirement accounts (IRAs), and other personal accounts.

Retirement accounts

The Survey of Income and Program Participation (SIPP) asks individuals to report whether they own any retirement accounts and categorizes them into:

• 401(k), 403(b), 503(b), and Thrift Savings Plans: employer-sponsored defined-contribution plans that deliver tax benefits.
• Individual Retirement Accounts (IRA) and Keogh accounts: defined-contribution plans that also provide tax benefits for retirement savings.
• Defined-benefit and cash balance plans: plans that typically deliver regular payments to support retirees.

Among working-age individuals (ages 15 to 64) in 2020, the most common type of retirement account was a 401(k)-style account (34.6%). About 18% had an IRA or Keogh account, and 13.5% had a defined-benefit or cash balance plan. The median value of these accounts was roughly the same at around $30,000.

However, there are inequalities in retirement account ownership. In 2020, working-age baby boomers (ages 56 to 64) were the most likely to own at least one type of retirement account (58.1%), followed by Gen X members ages 40 to 55 (56.1%). About half (49.5%) of Millennials (ages 24 to 39) owned at least one type of retirement account, while only 7.7% of Gen Z members (ages 15 to 23) owned a retirement account. Men were also slightly more likely (47.8%) than women (43.5%) to own a retirement account.

There are also differences in ownership by race and ethnicity. About 54% of non-Hispanic white individuals and 46.8% of non-Hispanic Asian individuals owned a retirement account. About 37% of non-Hispanic Black individuals and 36.1% of individuals categorized as "Other" non-Hispanic owned at least one retirement account, while ownership rates were lowest among Hispanic individuals (28.3%).

In the first quarter of 2024, Americans had $7.8 trillion invested in 401(k)s and $14.3 trillion in IRAs. The average IRA balance was $127,745, while the average 401(k) balance was slightly lower at $125,900.

Direct stock ownership

Age is another factor influencing direct stock ownership. Older Americans tend to have more assets and higher net worth, which can lead to greater direct stock ownership. However, even among younger adults under 35, 41% own some stock, either directly or indirectly.

Racial disparities in stock ownership

In 2024, about 62% of American adults, or roughly 162 million people, invested in the stock market. This figure has been steadily increasing since 2014, but it is still below pre-Great Recession levels, when it peaked in 2007 at 65%.

While stock ownership is strongly correlated with household income, formal education, age, marital status, and race, there are stark racial disparities in stock ownership in the US. According to a 2024 Federal Reserve report, white Americans own 89% of stocks, while Black and Hispanic Americans own 0.7% and 0.6% of stocks, respectively. This disparity persists even though Black and Hispanic Americans make up 13.8% and 18.9% of the US population.

Several factors contribute to the racial wealth gap in stock ownership. One key factor is the risk of unemployment, which is significantly higher for Black workers than their white peers, especially during economic downturns. Black workers are also more likely to join the long-term unemployed, with one-third of unemployed Black household heads reporting being out of work for a full year, compared to 17% of white household heads. As a result, Black workers and their families may choose to keep their money in safer assets, which is a rational decision given the higher risk of unemployment they face.

Additionally, lower participation in financial markets by minority households may also contribute to the racial wealth gap. Research suggests that minority households are less inclined to hold riskier, higher-yielding assets, and this hesitancy may be due to a lack of financial expertise and a cultural bias created by financial brokers who have primarily targeted whites.

Furthermore, differences in saving behavior and choice of assets may also play a role in the racial wealth gap. For example, a study by Sharmila Choudhury found that at every income quartile and education level, the percentage of Black and Hispanic households who own risky, higher-yielding assets is considerably smaller than that of white households.

To address the racial disparities in stock ownership and the broader racial wealth gap, it is essential to improve the pay and labor market conditions for Black workers and to increase financial inclusion and expertise among minority communities.

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