Home > Stocks > Who really owns Stock in the United States – Part 3?

Who really owns Stock in the United States – Part 3?

Now to investigate how many families really own stock and how it is distributed based on demographics like age of head of household, richest to poorest, etc.  There is not as much raw information on this as there were some of the other things I have been looking into.  But, again the Federal Reserve Board does have some statistics.  The main statistics that breaks down ownership of assets that I could find is the Survey of Consumer Finances (SCF) which is done every three years or so.  The latest full survey I could find was in 2007.  There was one done in 2010 which would be of much more relevance, but, it is not scheduled to be published until early 2012.  So, I will need to be satisfied with the pre-recession data and only get to speculate on what the effect of the recession has been.

According to the SCF in 2007, over 50% of US families owned stock.  The majority of this was owned via mutual funds or IRAs instead of owning individual stocks (Only 17% of families own individual shares of stock).  This 50% of families with either direct or indirect stock ownership is way up from the 30% in 1989.  My guess is this is due to a number of factors with the leading factor being the growth of Individual Retirement Accounts.  In fact, the IRA chart looks roughly the same as the stock holdings chart.  Also another factor is that the internet and discount brokers democratized stock market trading by making it both easier and cheaper for an investor.

Another interesting fact about these ownership charts is the downturn in 2001.  This coincides with the stock market downturn due to the dot com bubble crash in that time frame.  People got out of the market during this period.  With this in mind, I am sure people must have left the market after the recent recession and in some cases gotten back in as it has recovered over the last two years.  So, to hazard a guess, based on these factors, I would say that about 50% of Families actual own stock either directly or indirectly.

In the previous blogs, I had determined that the average family owned $160,000 worth of stock in the United States.  According the Survey of Consumer Finances, the average stock portfolio of households holding stock in 2007 was around $151,831.  Again, close enough to our working number.

So, if you are a stock owner do you own $160,000 worth of stock?  Again, I think what you own in stock is tied to what your income is, how old you are, etc.  That of course turns out to be true.  The SCF chart below shows the percent of income as bands.  For the families with incomes in the lowest 20% band only 15% of these families own stock.  For the families in the top 10% of income (90% – 100% band) over 90% of these families own stock.

So if you have more income, you are more likely to have extra money and therefore more likely to invest in the stock market.  Another perspective is looking at it by how old you are.  The next chart shows how many families own stock by the Age of the Head of Household which also correlates somewhat with income as you gain experience in the job market you usually make more money.

There are some minor surprises with this graph.  While the trend has been upwards over the last 20 years for families of all ages, they certainly don’t trend the same way.  As you would expect the two top groups are the ones with the most money and currently seriously saving for retirement.  For the Families with Head of Household between 45 and 64, about 60% of them own stocks.  The next group at over 50% is the 35 to 44 age group, which again makes some sense, as they are starting to earn more money and are having at least some vision of retirement.

The real surprise comes in the next groups.  People under 35 were saving much along the same trend line as everyone else until the dot com bust of 2001-2002 and then they got out and didn’t come back.  You can also see that the 35 – 44 year old group didn’t come back.  With all the press about saving for retirement and how Social Security is going broke, I feel that these age groups know they should be saving for retirement.  But, it appears that they aren’t at least in the stock market.   This is puzzling and a little concerning.  We can only assume this means that they didn’t have the money to get back in.  The question is will they get back in the stock market in the next few years and if they don’t how are they going to afford retirement.

Also, somewhat bewildering is the 65 – 75 age group and those over 75.  Both groups are buying stock.  In fact, they appear to be the fastest growing group in terms of families investing in the market.  It would be interesting to understand what percent of their investment is in stocks versus other things like bonds, CDs, etc.  Conventional wisdom is that you should be putting less in the stock market when you get older and while these statistics don’t identify how much they are putting in the stock market a larger proportion of the families appear to be investing at least some of their retirement money that they have to live on in the market.  This distribution in terms of actual dollars invested will be looked at in part 4 of this blog series on stock ownership.

In summary:

  • Since only half the families in the US own stock, our mythical Family investor has a portfolio worth $160,000 based on calculations done in my other blogs and validated in SCF Survey
  • Families that are getting close to retirement and are in their later middle age have more money and tend to be more into the market than other groups
  • Young people are not getting into the market as much as they were
  • Retired people are getting into the market faster than anyone else
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