Only 49% of Americans have any money in stocks at all,
according to the latest data from the Federal Reserve. That figure
includes everyone invested in retirement funds (think pensions and 401(k)
plans) as well as those who take the time to buy specific stocks such as Apple,
Ford and Facebook.
Even among the half of America that has money in the market,
there are disparities. The top 10% of American households have roughly $282,000
each in the market, if you take the median value of their holdings. Compare
that to the middle class, which has a median value of a mere $14,000 a
household.
The reality is the more money you put into the market, the
more you stand to gain (or lose). Putting a dollar into the popular S&P
500 index that tracks the largest companies traded on U.S. stock exchanges
in March 2009 would leave you with $3 today. That's a nice 200% return, but
obviously if you had invested $1 million in the market over the same time
period, you would now have $3 million.
The stock market has been especially kind to Caucasians and
college graduates. White households typically have about three times the amount
of money invested that non-white families have, according to the Fed data.
That's held true since the 1990s when the market shot up during the dotcom era.
Education also plays a major role. Only 35% of households
headed up by someone with a high school diploma have any money in the market.
Compare that to homes led by someone with a college degree -- 72% of them have
investments in equities.
Professor Grinblatt has shown through research that
people with higher IQs are more likely to put money into stocks. On the one
hand, some of these disparities should be expected. Rich people have more money
lying around in savings that they can invest than those who are struggling to
pay their bills. But the issues go deeper than that. Even among Americans who
are working and likely to have savings, they aren't always choosing to invest.
In its latest survey, the Employee Benefit Research
Institute found that only 64% of workers save for retirement or have a spouse
that does so. In 2007, stock ownership peaked at just over 53% of American
households owning any equity investments. The financial meltdown and housing
crisis hurt peoples' pocketbooks, but it also shook their faith in the system.
There are calls for more education about money matters to
try to close some of the stock market investing gap.
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