Will the wild successes of stocks like Tesla, Apple or Amazon create enough FOMO to bring mainstream America into the stock investing world? Maybe, but so far, the numbers aren’t adding up.
Economic turmoil in the last 12 years, the Great Recession in 2008 and the market plunging earlier this year due to the pandemic, has left many Americans with mixed feelings about what they view as “playing” the stock market.
Even with a sky-high stock market and indications of an economic recovery, most Americans remain unwilling to risk putting money in the stock market, and NerdWallet says that risk-free stock market avoidance may end up costing millennials $3.3 million in lost retirement savings.
Despite all the news you’ve been reading about newbies piling into zero-free trading apps like Robinhood, the average American is still afraid of the stock market.
A Gallup March-April 2020 poll shows that only 55% of Americans own stock in any way at all, and 87% of stock is owned by the wealthiest 10%.
And of those paltry percentages of stock-owning Americans, the majority—nearly 88%—didn’t own individual stocks. Instead, they owned safer investments such as mutual funds, 401ks and IRAs.
Of those surveyed, 35% thought real estate was the best investment, while only 21% thought stocks were a good long-term play--even when not distinguished from safer mutual funds.
Further, for any of those Americans who happen to have an extra $1,000 laying around, only 48% think it would be a good idea to invest in stocks. While that’s up from only 33% in April 2008--for obvious reasons--it’s still no real progress overall in two decades.
Continuing with that sentiment, only 17% of Americans trust the stock market completely, a survey by a leading personal finance site MagnifyMoney reveals, and 28% of those who completely trust the market are men, while only 5% are women.
They definitely are afraid of the “buy and hold” strategy, and it’s gotten worse over the past two decades.
In 2002, the percentage of stock ownership hit a high of 67. The 2008 recession took care of that, and those fears have never been assuaged.
While the S&P 500 has experienced a huge rally of more than 50% since bottoming out in March due to the pandemic, the American middle class is largely left out of that bonanza.
Only about one-third of families in the lower half of the income scale even had stock holdings at all. In the next 40% of the income scale, about 70% of households held stocks, while households in the top 10% of the income scale had stock ownership rates above 90%, data found.
Some 10% of the richest American households control the bulk of stocks and that unequal distribution of stock ownership hasn’t just accelerated an income inequality gap, it’s accelerated a racial wealth gap, too.
Analysis published by the Federal Reserve in 2017 found that 31% of black households and 28% of Hispanic households own equities either directly or indirectly, which compares with 61% of white families.
Similarly, analysis published by the Roosevelt Institute shows that Shareholder payments in the form of stock buybacks and dividends that went to white families between 2004 and 2019 totaled $13 trillion, compared with $181 billion that went to black households and $212 billion that went to Hispanic households in the same period.
Additional data from the Pew Research Center shows that among those with incomes above $100,000, 88% own stocks compared to 19% for households earning less than $35,000.
The bottom line is that polling data still isn’t showing any real increase in the number of Americans jumping into the stock market, but that could start to change due to the ‘democratization’ of trading.
A global pandemic might not be the best time to attempt to convince economic crisis-weary Americans to start gambling with their savings, but a rising class of youngsters seems more than willing to defy the traditions of Wall Street and start investing on their own—especially when it’s commission-free.
Indeed, a big change is coming. Robinhood alone has exploded from 1 million newbie users in 2016 to 10 million today.
By Josh Owens for Oilprice.com
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