Who Manages Their Own Investments?

In 2022, about 58% of American households owned stock, either directly or indirectly through mutual funds and other investment accounts. This is a record high, with the previous peak being 53% during the dot-com boom. In 2023, 61% of US adults invested in the stock market, a slight increase from 2022. However, this figure is still below pre-Great Recession levels, when it reached 65% in 2007.

Stock ownership by generation

Stock ownership, a key aspect of financial literacy and wealth building, varies across different generations. Each generation has unique experiences and relationships with investing, shaped by historical events, cultural shifts, and technological advancements. Here's a breakdown of stock ownership by generation, providing insights into the investing behaviors and preferences of each cohort.

Baby Boomers (born 1946-1964)

Baby Boomers have had a long history with investing and tend to be more comfortable with traditional investment strategies. Many Boomers witnessed the growth and evolution of the stock market, experiencing significant bull and bear markets. As a result, they often favor a more cautious approach to investing. According to a study by Fidelity Investments, 72% of Baby Boomers consider themselves "self-directed" investors, making their own investment decisions without relying heavily on professional advice. This generation tends to have a strong understanding of the stock market and is more likely to own individual stocks directly. However, they may also be more risk-averse, especially those nearing retirement age, opting for more conservative investments to protect their nest eggs.

Generation X (born 1965-1980)

Generation X, often referred to as the "sandwich generation," has unique financial challenges, balancing their own investments while also supporting aging parents and funding their children's education. This generation tends to be more financially conservative than Baby Boomers, having come of age during a time of economic uncertainty. They may have experienced events like the dot-com bubble and the 2008 financial crisis, shaping their investment strategies. Gen Xers are often self-reliant investors, with 67% considering themselves self-directed, according to Fidelity. They tend to take a more balanced approach to investing, diversifying their portfolios to manage risk while seeking growth opportunities.

Millennials (born 1981-1996)

Millennials, also known as Generation Y, have a complex relationship with stock ownership. This generation has faced unique financial challenges, such as student loan debt and a competitive job market. They tend to be more cautious and value financial stability. Millennials are also the generation that embraced technology and digital investing platforms the most. According to a survey by TD Ameritrade, 81% of Millennials prefer to invest online, and they are more likely to use robo-advisors and micro-investing apps. While they may be comfortable with technology, they seek guidance and often rely on financial advisors or automated investment services.

Generation Z (born 1997-2012)

Generation Z, the youngest cohort, is just beginning to enter the investing landscape. This generation has grown up with technology and has a natural affinity for digital platforms and mobile investing. They are likely to be influenced by social media and peer-to-peer networks when making investment decisions. Gen Zers tend to be more financially literate than older generations, with a strong focus on education and personal finance management. While they may be new to investing, they are eager to learn and engage with the stock market. Many online brokerage platforms are catering to this generation by offering user-friendly interfaces, educational resources, and fractional share investing, allowing them to build diverse portfolios with limited funds.

Each generation has its own unique relationship with stock ownership, influenced by their life experiences and the economic climate of their time. By understanding these differences, investors, financial advisors, and educators can tailor their approaches to better serve the needs and preferences of each generation. Financial literacy programs and investment strategies can be adapted to ensure that individuals of all ages can confidently build their wealth through stock ownership.

Stock ownership by race

Stock ownership in the United States is highly dependent on race and ethnicity, which are also highly correlated with income and wealth. White, non-Hispanic families are more likely to own stocks than Black and Hispanic families. In 2019, 61% of white, non-Hispanic families owned stocks, compared to only 34% of Black families and 24% of Hispanic families. This disparity is reflected in the value of stock holdings, with 24% of white, non-Hispanic family assets in stocks, compared to 13% for Black families and 10% for Hispanic families.

The racial wealth gap is largely attributed to differences in saving behavior and choice of assets, with minority households having lower participation in financial markets. Additionally, income levels and demographic characteristics do not fully explain the racial wealth gap, as the gap far exceeds the income gap. White households have earnings that are twice as much as minority households, yet they own at least five times the wealth.

Differences in financial literacy education and a lack of intergenerational wealth may also contribute to the racial disparity in stock ownership rates. Black households have traditionally been subjected to discrimination and fear, making them more cautious about risky investments. Furthermore, Black households often lack the opportunity to build wealth, as they have lower incomes and fewer opportunities for retirement plans like 401(k)s.

The disparity in stock ownership rates between white and Black households has narrowed slightly in recent years, but the coronavirus pandemic and recession may have widened the gap again. Researchers suggest that increased investment by racial minorities in the stock market could help narrow the wealth gap over time.

Direct vs. indirect ownership

According to Gallup, 61% of US adults invested in the stock market in 2023, with the figure rising to 62% in 2024. This is below pre-recession levels, when it peaked at 65% in 2007. Most Americans hold stocks indirectly through a mutual fund, index fund, or retirement account, while a smaller percentage hold stocks directly by purchasing individual shares.

Direct ownership refers to when the shares/units/percentage holding is held directly by the parent person or entity. Direct owners hold shares directly and are usually natural persons, but they can also be another entity, such as a parent business that is a direct owner in its direct subsidiary. For example, if a person owns 10% of a company's shares, they are considered a direct owner.

Indirect ownership, on the other hand, refers to when the shares/units/percentage holding is held through another entity. An indirect owner is someone who owns more than 50% of a company's or entity's shares, either directly or indirectly through other firms in the group. For example, if a person owns 50% of Company A and 20% of Company B, and Company A owns Company B, then that person is an indirect owner of Company B.

Beneficial ownership, as defined by the FATF, is the natural person who ultimately owns or controls a legal entity, as well as the natural person on whose behalf a business is conducted. Beneficial ownership can be direct or indirect, and it is an important aspect of the due diligence and KYC (Know Your Customer) process.

Income and net worth

Income refers to the money earned regularly, typically through employment or investments. It serves as the primary tool for building wealth. Net worth, on the other hand, is the difference between what an individual owns (assets) and what they owe (liabilities). It gives a true picture of their financial standing.

In the context of investing, income is crucial as it determines how much money an individual has to invest. A higher income can enable faster wealth accumulation. However, income alone does not guarantee financial success. It is essential to manage spending habits and make prudent investments to build wealth over time.

Net worth, which includes investments, bank accounts, real estate, and liabilities such as loans and credit card debt, provides a snapshot of an individual's financial situation. Tracking net worth over time offers valuable insights into their financial trends and helps evaluate progress toward short-term and long-term financial goals.

According to Gallup, in 2023, stock ownership in the United States was strongly correlated with household income. The percentage of adults owning stock ranged from 84% in households earning $100,000 or more to 29% in households earning less than $40,000 annually.

While income and net worth are distinct concepts, they are interconnected. Income influences an individual's ability to invest and build net worth, while net worth reflects the outcome of their income, spending, and investment decisions over time.

Age and marital status

According to a Gallup survey, 61% of US adults (approximately 158 million people) invested in the stock market in 2023. This figure is up from 56% in 2021 and 55% in 2020, and is the highest it has been since 2008.

Stock ownership is strongly correlated with marital status. Married couples hold substantially more wealth than single people, even when accounting for the presence of two earners in a married household. This is partly because married couples benefit from economies of scale, allowing them to share expenses and devote more of their household income to building wealth.

Married individuals generally do not make investment decisions on their own. Their investment selection tends to be influenced by their spouse, or the couple makes combined decisions on financial matters. A study by Lyons et al. (2007) found that household financial decisions tend to reflect the preferences of the spouse with greater bargaining power.

On the other hand, single people have more freedom when it comes to making financial decisions. They can create a desirable financial future without having to discuss their plans with a spouse.

Age also plays a role in investment preferences. A study by Jain and Mandot (2012) found that investors between the ages of 27 and 50 were more willing to take risks than investors over the age of 50.

Overall, while there is limited data on the exact percentage of people who do their own investing, it is clear that age and marital status play a significant role in investment behaviours and preferences.

Frequently asked questions