State of Investors – Nearly Half of Americans Do Not Own Stocks

Gallup is out with its most recent Economy and Finance Survey, which shines light on some shocking details about the status of American savers. Are you part of the 48% of Americans guaranteed to lose money every year?



Those who frequently read articles here on Begin To Invest, or have signed up for our newsletter and free eBook already know the poor status of American savers. Some of the stats:

  • According to financial literacy tests, today’s high schoolers are the most financial literate generation yet (with scores around 45% on Jump Start Coalition financial literacy tests)


  • 2012 saw the lowest percentage of Americans contribute to an IRA (15%) ever recorded.


  • Only 44% of workers under the age of 25 contribute to their employer’s contribution plan, according to Vanguard.



So it should be no surprise that the most recent numbers from Gallup indicate that fewer Americans own stock today than any year since the survey began in 1998.


Gallup Stock Ownership PNG



Unfortunately, this means that 48% of Americans are in asset classes that have historically always underperformed and today offer guaranteed negative real returns. Today’s young investors are loading up in bonds, CDs and cash which will hardly be able to keep up their purchasing power, not to mention create growth in their retirement savings.


Returns after tax and inflation of different securities


Investors were shocked by the market crash of 2008. A once in a lifetime stock market decline has set up the next generation of investors to rule out stocks all together. This led many to abandon stocks in 2009, missing one of the best 3 year periods in stock market history.

In fact, investors who just sat tight during the decline have already recovered nearly all their losses.


S&P 500 chart

This chart above tells you the whole story. Stocks do go down. If fact, you are guaranteed some negative years in the stock market, but unlike cash or CDs, you are also going to have years which generate real positive returns as well. Look at the chart above, how many times has the market gone down? A lot. But look at the total return investors received by just staying the course! $15 invested in 1950 is worth nearly $1,400 today.


What does this mean for today’s investors?

It means we will likely see a continuation of savers being unable to retire, because returns on cash and CDs earn next to nothing and after inflation have negative real returns.Today, a 1 year CD yields about 1%, while inflation is around 2%. This means a guaranteed 1% loss of purchasing power! Cash guarantees a 2% loss. 10 year treasury bonds may cause you to break even.



It means we are setting up another generation of Americans for future failure if this mindset continues.


Stocks need to be part of a broadly diversified portfolio for nearly anyone saving for retirement. There is almost no getting around it. Without the returns historically given by stocks, investors cannot hope to generate the growth and income needed to retire.




Are you part of the 48% that does not own stocks? It is not too late. Whether it is because you are scared of stocks or just don’t feel educated enough to begin investing in stocks, Begin To Invest has numerous guides and articles you to get started.


So what are you waiting for, time – and money – is wasting!

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