One of the leading news stories each and every day for the last week or so has been the recent downturn in the stock market. While the market is still way up over the past 12 months, 5 and 10 years, the recent ~10% sell off is grabbing the headlines of most news broadcasts, newspapers, online feeds, and other sources of information.
However, the fact is that roughly 50% of households do not hold any equity investments at all. So, whether the stock market goes up or down 10 percent or 50 percent, they are not “directly” impacted by a change in their wealth. Of course, they could be “indirectly” impacted if the sell offer were to lead to a slowdown in the economy, higher unemployment rates, etc.
While it should not be that surprising, the data on who owns stock and who doesn’t shows that higher income families own most of the investments in this country. Lower income families, many of them who use this website for information on financial assistance programs, will very rarely hold any stocks. In addition to that, a large number (even majority?) of middle to upper middle-class households also do not hold any equity investments at all either.
Details of stock ownership
Data provided by the Federal Reserve, Gallup as well as the National Bureau of Economic Research shed some light on who does or doesn’t own stock. While each source of data is slightly different, they all show the same general trends. Stock ownership also takes into effect all types of investment “vehicles”, ranging from 401Ks to Exchange Traded Funds, direct equity investments, and really any type of investment. And we really hope no one bought into that Bitcoin craze/bubble (at least on the tail end of it), which is down about 50% since around Christmas! Obviously, anyone without investments will feel no direct effect from the recent sell off.
This data also considers retirement accounts. It was kind of surprising to us that roughly 50% of Americans (who do not own stock) do not have any equity investments in a retirement plan, such as 401K, pension, or IRA. But then again the Pew Charitable Trusts shows that about 1/3 of Americans lack access to defined benefit plan (i.e. pension, etc.) or defined contribution plan (i.e. 401K, etc.). This makes it even more challenging for those families to save for retirement.
First, only about 50% of households have any stock investments at all. This is a decrease of about 16% since right before the great recession of 2007 – 2009, at which time about 2/3 of Americans had some investments. Lets break the data down further.
- The data shows that the top 1% of households in the country (as defined by wealth) own about 40% of the stock in this country.
- The top 10% (which of course is inclusive of that 1 percent figure above) own about 85% of the stock.
- The top 20% (which would include the 2 groups above) own about 90%.
- The top 40% (including the categories above) own about 98% of the market.
That leaves the “rest” of American households (roughly equivalent to 60%), so the majority of the population. The remaining 60% of households own roughly about 2% of the stock market in this country. They will not be directly affected by the day to day moves in the market, whether it goes up or down. But we do hope that for those who are not invested in the market, they take this recent downdraft as a good opportunity to maybe start investing. Even if you are lower income, you can get started with even a few dollars.
For the majority Americans, as long as there is no trickle-down effect to the overall economy, most people are not impacted by the recent declines. So while the press will sometimes try to scare people, the majority of households go about their day even as the market goes down.