The Number of American Citizens Investing in Stocks Surpasses Expectations.
The Number of American Citizens Investing in Stocks Surpasses Expectations.
Americans have numerous methods to invest their funds, ranging from workplace retirement plans to establishing individual accounts with prominent stock brokers. Yet, how many individuals invest in the stock market?
Approximately 162 million adults in the United States engage in stock investing, as per a recent Gallup survey. However, certain demographic groups have a significantly higher stake than others.
Explore the latest statistics on the number of American stock investors, as well as the breakdown of stock ownership by wealth, generation, and race.
Demographics
Demographics refer to statistical characteristics associated with a population. Such characteristics might include gender, age, race, ethnicity, income, and more.
How many Americans invest in stocks?
According to Gallup, 162 million Americans, or 62% of U.S. adults, invest in stocks. This represents a 1% increase from 2023 and an 8% increase from 2014.
Stock investment distribution witnessed a decline following the recession. From 2001 to 2008, an average of 62% of Americans held stocks. However, this figure dropped to as low as 52% in 2013 and 2016. Despite market fluctuations, stock investment has been steadily on the rise since then.
Most Americans hold stocks indirectly through mutual funds, index funds, or retirement accounts such as 401(k)s. A smaller percentage owns stocks directly, purchasing individual shares.
In 2022, the Federal Reserve reported the following stock ownership figures:
- 58% of U.S. families (approximately 72 million families) held stock.
- 21% of U.S. families (approximately 26 million families) directly held stock.
Direct stock ownership has rebounded to pre-2008 levels, while overall stock ownership, accounting for mutual funds, has surpassed this mark.
Both direct stock ownership and overall ownership increased by approximately 5% from 2019 to 2022, a consequence of strong market performance during this period.
Reviewing the historical trends, overall stock ownership grew at a faster pace than direct ownership from 1989 to 2001. This can be partially attributed to the wider availability of 401(k)s. In 1989, 17.3 million Americans invested in 401(k) programs. By 2000, this number had more than doubled, reaching 39.8 million enrolled participants.
Stock ownership by level of wealth
While over half of U.S. adults invest in stocks, most do not possess substantial holdings. The wealthiest 1% holds 50% of stocks, valued at $23.3 trillion, as of the third quarter of 2024, according to the Federal Reserve.
Expanding this to the top 10%, this group holds 87% of stocks, amounting to $35.5 trillion in value.
Conversely, the remaining majority of Americans has seen their stock ownership decrease. The bottom 50% in terms of net worth possesses only 1% of stocks, worth approximately $480 billion.
Stock ownership by generation
Stock ownership by generation
Baby boomers hold the largest share of stocks, with no plans to relinquish control. They account for 54% of equities, nearing their record-high share, valued at $25 trillion, as of the third quarter of 2024, according to the Federal Reserve.
It's no surprise that baby boomers own a significant share of stocks. They have had ample time to build wealth through Wall Street and watch their investments flourish. The average net worth increases as Americans age, often resulting in older Americans having more funds to invest in the stock market.
However, Generation X and millennials have also boosted their holdings. Generation X owns 21.7% of stocks, valued at $10.1 trillion. Millennials own 7.8% of stocks, valued at $3.6 trillion. The Federal Reserve does not disclose stock ownership statistics for Generation Z.
Our research suggests that 57% of investors in this age range invest in the stock market.
Stock ownership by race
Stock ownership by race
Stock ownership is significantly skewed along racial lines, with white Americans owning 89% of stocks, totaling $41.3 trillion in value.
The share of stocks owned by white Americans has gradually declined from 96.2% in 1989. However, the breakdown of stock ownership by race does not closely reflect the racial makeup of the U.S. population.
Despite making up 13.8% of the U.S. population, Black Americans own barely 0.7% of stocks, valued at $310 billion. The percentage of Black Americans who own stocks has decreased since 2012, while the value of stocks held by Black Americans has grown.
Hispanic Americans own a smaller share of stocks than expected, given their 18.9% representation in the U.S. population. Hispanic Americans hold 0.6% of stocks, valued at $300 billion. The share of stocks owned by Hispanic Americans is lower now than it was in 1989.
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The median value of shared stock investments among American families in 2022 stood at an impressive $52,000. Despite this significant rise, it falls short of the record set in 2001. Conversely, the median value of directly held stocks by American families in 2022 dropped to its lowest-ever record of $15,000, representing a stark decrease of around $14,000 compared to the 2019 figure (adjusted for inflation).
This disparity in stock values may suggest that Americans are increasingly choosing to invest in higher-risk stocks, which provided substantial returns between 2020 and the year's end 2021, but subsequently plummeted in value in 2022. Direct stock holdings exclude mutual funds, which are generally more diverse and hence carry lower risks.
Investment Trends
Data on stock market participation presents both hopeful indicators and challenging issues.
It's heartening to note that 62% of American adults possess stock, with younger generations gradually increasing their investment participation. In fact, millennials have expanded their stock ownership significantly over the past decade. Moreover, Gen Z is gaining investment knowledge and is participating in the market as well.
However, it's crucial to acknowledge that the wealthiest Americans own much more stock than the majority of the population (about 90%). Stock ownership rates remain relatively stagnant within Hispanic and Black households.
Investment may seem daunting to the 37% of Americans who currently do not own stocks. Given that the estimated average return on the stock market is roughly 10% annually, it's an excellent retirement savings opportunity. Moreover, there are high-performing investment platforms.
First-time investors can benefit from the following tips:
- Create a well-rounded portfolio containing at least 25 stocks. Diversification significantly reduces risk as it limits dependency on a few companies.
- If you're seeking simplicity, consider investing in index funds or low-cost exchange-traded funds (ETFs). These investment vehicles comprise a diverse basket of stocks, providing immediate portfolio diversification.
- Regular investment, whether through a brokerage account, retirement accounts, or both, is essential to wealth accumulation, even if the amount invested is small.
Lastly, invest for the long term. Our advice is to hold investments for at least five years, adhering to financial norms even during market fluctuations.
Becoming a successful investor isn't necessarily complex. By buying and holding outstanding companies, substantial financial gains can be realized in the long run.
Sources
- Department of Labor (2022). "Private Pension Plan Bulletin Historical Tables and Graphs 1975-2019."
- Federal Reserve (2024). "DFA: Distributional Financial Accounts."
- Federal Reserve (2024). "Survey of Consumer Finances."
- Gallup (2024). "Stock Market."
- Gallup (2024). “Stocks Up, Gold Down in Americans’ Best Investment Ratings.”
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Given the context provided, here are two sentences that include the words 'money', 'research', and 'finance':
- The research on investment trends in the United States indicates that, despite a significant increase in stock ownership by younger generations, the wealthiest Americans still hold the majority of the nation's stocks, controlling more than 90% of the market's value.
- From a financial perspective, investing in the stock market can be an effective strategy for long-term wealth accumulation, as the average estimated return on the stock market is around 10% annually. However, thorough research is essential to create a well-rounded portfolio and minimize risk.