WHO OWNS STOCKS? IT´S NOT JUST THE RICH / THE WALL STREET JOURNAL

Oct 27, 2014 5:35 pm ET

Who Owns Stocks? It’s Not Just the Rich
      
By Josh Zumbrun     


 

Millions of Americans have exited the stock market in recent years and are now missing out on the benefits of the equities boom since 2009.

 

It might be tempting to assume that stock ownership is primarily a “rich-person problem,” but a look at the data shows that in fact it’s very common for middle-income families to own stocks, either directly or indirectly through retirement accounts. Stock ownership isn’t just for the rich, though it’s been trending that way. 

Among the middle 20% of families, which earn an average of $49,600, almost half own some stocks, according to the Federal Reserve’s Survey of Consumer Finances, one of the best available sources of wealth data. Among those earning in the 60th-80th percentile, or an average of about $80,000, almost 70% own stocks.

 

One of the key reasons that investors favor stocks is that, over the long run, the asset has historically performed very well. Thus it’s no surprise that stock wealth grows with age. Even middle-income families who sock away some savings into the market over the course of their careers can have a substantial amount of stock wealth by the time they’re near retirement.

 

 

The median 65-75 year old family has $117,400 in stocks. That means that half of them have even more than that. Stock market investing decisions aren’t just for hedge fund managers and millionaires. Lots of middle-income families, especially late in their careers, have to manage a consequential portfolio. 

 

Only the highest-earning families, however, are upping their ownership. In the 1990s, families at all levels were increasingly entering the market. But since 2001, only the highest earners are more likely to own stocks. Even families in the 80th to 90th percentile—earning an average of $123,000 a year, according to the Fed data—have exited the market.

Families in the 20th to 80th percentile have been the most likely to leave, with 4% to 9% fewer families in each of those ranges owning stocks than in 2001, at the peak of the dot-com bubble. That may sound like modest movement, but consider:

That works out to about 1.7 million families in the 60th to 80th percentile who have left the market. About 1 million families in the 40th to 60th percentile who left the market. And about 2.1 million families in the 20th to 40th percentile who have left the market.

Many of those families likely had no choice, as economic upheaval in the form of the 2001 and 2007-09 recessions may have left many people in dire need of cash when the market was down. Stock ownership in the U.S. remains widespread, but many families have been squeezed or spooked out of the market at precisely the moment it’s done so well.