Americans: Investors Or Not?

As of 2023, 61% of American adults invest in the stock market, according to Gallup. This is up from 56% in 2021 and 55% in 2020, and is the highest it has been since 2008. Stock ownership averaged 62% between 2001 and 2008 but fell after the 2007-2009 recession. The latest data from the Federal Reserve, from 2016, shows that 52% of American families have some investment in the stock market, mostly from retirement accounts.

Stock ownership is correlated with income, education, age, marital status and race

Stock ownership in the US is influenced by a variety of demographic factors, including income, education, age, marital status, and race. These factors are interconnected and play a significant role in shaping an individual's investment behaviour and financial portfolio composition. Here is an in-depth look at how these factors correlate with stock ownership:

Income

Income is a key determinant of stock ownership. Gallup's 2023 survey found a strong correlation between household income and stock ownership. The survey revealed that 84% of adults in households earning $100,000 or more owned stocks, while only 29% of those in households earning less than $40,000 were stockholders. This disparity highlights the impact of economic resources on an individual's ability to invest in the stock market. Higher-income households have more disposable income to allocate towards stocks, while lower-income households may have limited financial capacity to invest.

Education

Formal education also plays a significant role in stock ownership. The Gallup survey showed that about eight in 10 college graduates and postgraduates owned stocks, indicating a higher propensity for stock market participation among educated individuals. This correlation may be attributed to increased financial literacy, a better understanding of investment options, and higher-income levels often associated with higher educational attainment.

Age

Age is another factor influencing stock ownership. Generally, stock ownership tends to increase with age, as individuals progress in their careers and accumulate more financial resources. Older individuals may also have a longer time horizon for investing, allowing them to take on more risk and invest in the stock market. Gallup's data revealed that stock ownership was highest among individuals aged 50-64 at 62%, followed by those aged 65 and above at 54%. Younger adults, aged 18-29, had a lower stock ownership rate of 31%.

Marital Status

Marital status also impacts stock ownership. Married individuals often benefit from dual incomes, providing more financial resources for investments. Additionally, joint financial decision-making and shared economic goals can influence the likelihood of stock ownership. However, it is important to note that marital status can intersect with other factors, such as age and income, further influencing stock ownership behaviours.

Race

Race is a critical factor in stock ownership, and there are significant disparities across racial and ethnic groups. White households have been found to own stocks at higher rates than minority households, including Black and Hispanic households. These differences persist even after controlling for income and demographic factors. For example, in a study using data from the Health and Retirement Study, less than 10% of Black and Hispanic households reported owning stocks, compared to about 36% of White households. These racial disparities in stock ownership contribute to the broader racial wealth gap and highlight the need for initiatives to improve financial inclusion and address systemic inequalities.

In conclusion, stock ownership in the US is shaped by a multitude of interrelated factors, including income, education, age, marital status, and race. Understanding these correlations provides valuable insights into investment behaviours and the distribution of financial assets across different demographic groups. Addressing these disparities and promoting greater financial inclusion can contribute to a more equitable distribution of wealth and opportunities for economic growth.

In 2019, 53% of families were invested in the stock market

In 2019, 53% of US families were invested in the stock market. This is a notable increase from 1989, when only 32% of families owned publicly traded stock. The rise in stock ownership is largely due to indirect investment, with only 15% of US families directly owning stock in 2019. Innovations such as the 1981 Internal Revenue Service rules, which allowed 401(k) contributions to be deducted from paychecks, have contributed to this shift.

The average stock owner is most likely to be invested through mutual funds and retirement plans. In fact, most stock owners in 2019 held stocks indirectly rather than through direct ownership. This trend is reflected in the data, which shows that direct stock ownership fell from 17% in 1989 to 15% in 2019.

Stock ownership varies across different demographic groups. Families with higher incomes and net worth are more likely to own stock and tend to purchase more of it. In 2019, 92% of families in the top 10% of the income distribution owned stock, compared to only 15% of families in the bottom 20%. The median stock value held among households in the market was $40,000, but this amount varied significantly by income level. For those in the top 10% of income earners, the median stock value was $432,000, while for the bottom 60%, it was just $15,000.

Race and ethnicity also play a role in stock ownership rates. White, non-Hispanic families are more likely to own stock than Black or Hispanic families. In 2019, 61% of white, non-Hispanic families owned stock, compared to 34% of Black families and 24% of Hispanic families. The median stock value for white, non-Hispanic investors was $51,000, while for Black and Hispanic families, it was $15,000.

Age is another factor influencing stock ownership. Families with a head of household aged 45 to 54 had the highest rate of stock ownership in 2019, at 58%. However, older Americans tend to have higher amounts of invested stock due to having more time to accumulate investments. Families with a head of household aged 65 or older held 43% of the total dollar value of stock in 2019, with a median investment of over $100,000.

Stock ownership has been rising since 1989, but it's still below pre-recession levels

Stock ownership in the US has been on an overall upward trajectory since 1989, but it has not yet returned to pre-recession levels.

In 1989, 32% of US families owned publicly traded stock in some form. By 2019, this figure had risen to 53%. However, the percentage of families with direct stock holdings actually fell during this time, from 17% to 15%. The rise in total stock ownership was driven by indirect investment, through avenues such as mutual funds and retirement plans.

The percentage of Americans who own stocks has been steadily rising since 2016, when it hit a low of 52%. As of 2023, 61% of Americans hold at least some stocks, the highest level since 2008. This recovery in stock ownership is likely due to stocks proving to be a solid long-term investment, as well as increased income among Americans giving them greater means to invest.

However, stock ownership rates are still below the average of 62% between 2001 and 2008. The Great Recession, which lasted from December 2007 to June 2009, caused a sharp decline in stock ownership, which remained depressed for over a decade. The S&P 500 Index plunged in value by over 40%, deterring new investors and causing others to withdraw their money from the stock market.

While stock ownership is rising, it is important to note that it is still below pre-recession levels. This may be due to lingering effects of the Great Recession, as well as other economic factors and shifts in investment preferences.

The top 10% of income earners own 70% of the stock market

The latest data shows that 61% of Americans own stocks, the highest level since 2008. This is up from 56% in 2021 and 55% in 2020. However, the distribution of these stocks is highly unequal. The top 10% of income earners own 70% of the stock market, while the bottom 60% of income earners own only 7%. This disparity is even more pronounced when considering direct stock ownership, with only 5% of families in the bottom quintile holding stocks directly, compared to 44% of families in the top 10%.

The disparity in stock ownership is also evident across racial and ethnic groups. While 61% of white, non-Hispanic families owned stocks in 2019, that figure was significantly lower for Black and Hispanic families, at 34% and 24%, respectively. The median stock value owned by Black and Hispanic families was $15,000, while for non-Hispanic white families, it was nearly $51,000.

The unequal distribution of stock ownership contributes to wealth inequality, as the stock market is a significant source of wealth creation. The top 1% of American households have amassed vast wealth during the COVID-19 pandemic, adding about $8.9 trillion from the beginning of the pandemic in Q1 2020 to the end of December 2021. The total wealth of the top 1% has reached a record high, according to Federal Reserve data.

The concentration of wealth in the hands of the top 10% of income earners has significant implications for economic inequality and social mobility. As the stock market continues to fluctuate, those with the most investments stand to gain or lose the most. This dynamic further widens the wealth gap between the top 10% and the rest of the population.

While the stock market is touted as a vehicle for wealth creation, it is clear that the benefits are disproportionately accrued by a small segment of the population. The bottom 60% of income earners have limited opportunities to build wealth through stock ownership, contributing to a broader pattern of economic inequality in the United States.

Older white people with high incomes are more likely to own stocks

According to a 2019 Federal Reserve survey, 53% of US families owned publicly traded stock in some form, up from 32% in 1989. However, the survey also revealed that stock ownership is highly correlated with race and ethnicity. White, non-Hispanic families are more likely to own stocks than Black and Hispanic families. While 61% of white, non-Hispanic families owned stocks in 2019, only 34% of Black and 24% of Hispanic families did. This disparity is also evident in the median value of stock holdings, with white, non-Hispanic families having a median value of $51,000, compared to $15,000 for Black and Hispanic families.

Income is another crucial factor influencing stock ownership. The top 10% of income earners own a disproportionate share of the stock market. In 2019, 92% of families in the top 10% of the income distribution owned stocks, compared to only 15% of families in the bottom 20%. The median stock value held by households in the top 10% was $432,000, while for the bottom 60% of income earners, it was just $15,000.

Age also plays a role in stock ownership. While families with a head of household aged 45 to 54 had the highest rate of stock ownership at 58%, older Americans tend to have higher stock values due to having more time to accumulate investments. Families with a head of household aged 65 or older held 43% of the total dollar value of stocks in 2019, with a median investment of $109,000.

Overall, the intersection of race, income, and age influences stock ownership in the US, with older, high-income white individuals being more likely to own stocks and have higher stock values.

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