Home > Stocks > Who really owns Stock in the United States – Part 4?

Who really owns Stock in the United States – Part 4?

So, half the families in the US own stock either directly or indirectly through mutual funds or IRAs.  If you make more money, have a college degree or are older, you are more likely to own stock.  So, as stock owners out there we have an average or mean of about $160,000 in our portfolio.  Again, this number doesn’t feel right because we have a gut feeling that it is concentrated more in a few wealthy individuals, rather than across all income and net worth brackets.  Again digging into the Survey of Consumer Finance (SCF) you can get some more insights into our mythical average family investor.

We saw in previous blog that around 50% of families owned stocks in some fashion, although it varies greatly by how much money you make and your age.  Also, in a previous blog we determined that wealth is concentrated, well, with the wealthy.  We also saw that there are significant differences between average (mean) and median wealth holdings.  If we had a median value for a stock holder it would probably be a better indication of this mythical “average” family investor.

Since we looked at wealth and income let’s look at the ownership of individual stocks, pooled mutual funds and IRAs in terms of the dollar amount owned by the age brackets we utilized in the previous blog.

It is obvious from the above chart that the people in the top 10% of wealth are getting a bigger and bigger proportion of the stock market, as well as getting wealthier at a much accelerated pace than everyone else.   The average combined stock ownership (individual stocks, mutual funds and IRAs) is over $1,000,000 for the wealthiest 10% of families.  As we saw, their total wealth was about $3.7 Million which means 27% their wealth is tied up in the Stock Market and over 73% in bonds, real estate and other assets.  The top 10% wealthiest people owned about 68% of the stock market in 2007 up from 60% in 1989.  While this is a high percentage, it was lower than I was suspecting.  If someone had asked me I would have said the top 10% of families owned 90%+ or the stock market.  Makes me want to go look at some of those “shock headlines” I thought I had seen before and do some investigating.

So, the portfolio value by wealth band in 2007 was:

It seems that regardless of your income bracket that the average (mean) size is 2 ½ to 3 ½ times bigger than the median portfolio size.  This means there is great variability in the portfolio values in all the wealth brackets.  It is not spread evenly within the band, it must be “lumpy”.  You can draw the assumption from this that the portfolios of the 50% of people above the median are significantly greater than the ones in the lower half because the mean is so much higher than the median.  In other words, regardless of the wealth of a person, some people invest more in the stock market than others in their wealth bracket.

What about age?  It seems like the people getting ready for retirement should have the biggest footprint as they are investing for that retirement on unlike older people they are willing to take more risks to accumulate wealth via the stock market.

Well somewhat of a surprise, the biggest group was the newly retired (ages 65 – 74) with an average stock portfolio of $302,000.  The next biggest group is the 55 – 64 group with an average of $299,000.  It goes down there by age group.  So, it appears that the older you get the bigger your portfolio is because you have invested for more years and the stock market has appreciated in general.  The only exception is the over 75 group, who have only $139,000 average portfolio sizes.   This makes some sense because they would be living off of this and moving to other more conservative investments like bonds and CDs.

So, now how does our average family investor look like with his $160,000 portfolio?  The $160,000 threshold in terms of age is around the 45–54 Age Group because their average portfolio is $177,000.  The 34–45 Age Group has an average portfolio of $78,000.  So we would say that if the average is $177K for the 45-54 Group this means that our $160K would probably be in their late 40s.  Let’s say 47.  They would definitely be towards the high end.  Since the 80% – 90% Bracket only has a $132,000 average portfolio, our mythical investor would have to be closer to the 90% wealth bracket.  Let’s peg it for talking purposes at 88% wealth bracket meaning only 12% have more money.

The approach up to this point has used averages or the mean in order to identify our average family investor.  But, looking at all the data it becomes more evident that the average person’s actual portfolio value is closer to the median than the mean.  We saw that the differences were quite a bit higher when looking at the mean versus the median.  There is a smaller group of people with very big portfolios and a whole lot of people with portfolios less than the average.

We showed earlier the median portfolio for all families.  Since, we are looking for to understand what the average portfolio a family investor is managing, we don’t want to include all the people that aren’t in the stock market.  So, we need to go back and find the Median Size Portfolio for people that are actually actively in the stock market.  This is also available in the SCF survey and is the Median Size Portfolio for Active Investors in the table below.

So, according to this analysis the new portfolio value for our average family investor is $107,000 instead of the $160,000 we have been using.  This is more representative of what kind of money the average family investor is playing with.  This investor is in their late 40s.  As they get older, they will start managing more money.

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