According to a new Federal Reserve survey reported by The Wall Street Journal, the percentage of Americans who own stocks is at an all-time high. As of 2022, approximately 58% of American households owned stocks — up from 53% in 2019, and up from only about 33% in 1989. This is a big transformation that can tell us a lot about how Americans manage money and invest for the future, and even how people see themselves.
Why does it matter how many Americans own stock? Because it can help us understand overall stock market trends and envision a (hopefully) brighter future for Americans’ personal finances. More Americans owning stock could be a sign that Americans are getting more savvy about investments, are more likely to be on track for retirement, and that more people are sharing in the wealth generated by the world’s most successful companies.
Let’s see why more Americans owning stock could be good news for the economy — and for your retirement savings.
Why it’s good news that more Americans own stocks
For most of the history of the stock market, owning stocks was considered a pastime that was mainly for the wealthy. Back in the 1920s and 1930s, the average American family didn’t have enough money to buy stocks. Even into the 1950s and 1960s, with a growing middle class, most of the average household’s wealth was more likely to be invested in houses or land, not financial assets. A generation or two ago, many middle class people might not have thought of themselves as investors or shareholders.
Two big trends have shifted this mindset. One is the rise of defined contribution pension programs, like 401(k)s, that let employees invest and manage their own money for retirement. And more recently during the pandemic, there was a boom in retail investing with online trading platforms like Robinhood. America is a nation of shareholders now. Millions of Americans have gotten interested in — and invested in — the stock market.
When more Americans own stock, that’s good for the economy in a few ways:
- It’s easier for companies to get capital to invest in growth.
- There’s more money going to stocks of companies that can use it for productive goals, like creating jobs and making innovative products.
- More Americans owning stock (and boosting their retirement savings) could help relieve the retirement crisis and take pressure off of Social Security.
- More Americans are likely to share in the wealth created by the stock market.
On that last point: owning stock is not just for rich people anymore. It’s true that most stocks are owned by the wealthiest investors. But lower-income Americans have also seen big gains in their stock ownership since 1989, according to the Federal Reserve survey. As of 2022:
- About 40% of Americans in the 20th-39.9th income percentile owned stocks, up from about 15% in 1989
- About 18% of Americans in the bottom 20% of income owned stocks, up from about 3% in 1989
Why is buying stocks a good idea for your retirement?
If you’re investing for retirement, it’s important to buy some stocks. Investing in stocks means that you own a share of the future profits of the world’s most successful companies. This can be one of the most effective ways to help you build wealth. Although the stock market can be volatile, with big ups and downs depending on the year, month, or day, over the long run, stock prices tend to go up. During the past 50 years, the stock market (as measured by performance of the S&P 500 index) delivered an average annualized return of 9.4%. That’s a better return on investment (ROI) than the best high-yield savings accounts — and it’s lasted for 50 years.
One of the best ways to buy stocks is to put a consistent amount of money into a 401(k), traditional IRA or Roth IRA, or other brokerage account with automatic contributions from every paycheck. This way, you can use dollar-cost averaging to keep buying stocks (or an appropriate mix of stocks, bonds, and ETFs) month after month, year after year.
Owning stocks can be a great way to grow your money, because along with the long-term appreciation (growth) of their share prices, stocks tend to pay dividends to investors. Set up your investment account to automatically reinvest your dividends, and you can quietly turn your stock portfolio into a wealth-building machine.
Bottom line: More Americans own stocks now than at any time in U.S. history. This is good news, because it means that more people might be getting savvy about investments, and sharing in the profits created by the stock market and the world’s most successful companies. Investing in stocks for the long term is often one of the best ways to save for retirement and grow your wealth.
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