The Stock Market Has No Impact On The Average Person

Ben Le Fort
Dec 7, 2018 · 5 min read

For all the obsession over the ups and downs of the stock market, for the majority of Americans, the stock market has absolutely no impact on their life. That is because more than 50% of Americans don’t have any ownership of stocks according to a report from the Washington Post.

Who Owns Stocks?

If you own even one share of stock in a publicly-traded company, go ahead and pat yourself on the back because you are among the 14% of Americans who directly own stocks. If you have stocks, mutual funds or index funds in a 401(k) or other retirement accounts than count yourself lucky. 50.7% of Americans have zero investment in the stock market.

Investment in the stock market has become a privilege for the wealthiest among us. This is how stock ownership breaks down by household wealth:

  • The bottom 40% own 0.5% of stocks
  • The bottom 60% own less than 2% of stocks
  • The Bottom 80% own 6.8% of stocks
  • The top 20% own 93.2% of stocks
  • The top 1% own 40.3% of stocks

Most people will focus on the fact that the top 1% of wealthy households own 40.3% of American stocks. However, I want to focus on the fact that 80% of the households in the U.S own less than 7% of stocks. This means that for the vast majority of Americans if the stock market were to increase or decrease by 50% it would have no material impact on their lives.

We live in an age where it has never been easier for middle-class people to get involved in the stock market. You can open an online brokerage account and buy individual stocks for less than $5 and buy Index funds for free. The financial barrier to investing in the stock market has never been lower, yet fewer people than ever are getting involved.

Why would this be?

The Financial Crisis Has Traumatized Us.

I recently wrote about how the financial crisis has made the average person fearful of investing in the stock market. Here is a quick summary of what I wrote.

  • Most people have no clue about the stock market. Two-thirds of people surveyed thought the stock market has stayed the same or gone down since 2009 (It’s up nearly 300%)
  • The majority of people say they have not fully recovered from the financial crisis. This explains the previous number. If your personal financial situation has stayed the same or gone worse, you’re likely to believe the stock market has stayed the same or gone down
  • 27% of people who had a retirement account during the financial crisis, stopped contributing to their 401(k) or saving for retirement.

That last statistic is both understandable and sad. It’s understandable that a lot of people who lost half of their retirement fund during the financial crisis would be scared off from putting any more money into the market. I was only 19 during the crash so I had no money in the market at the time, but I can only imagine how terrifying it must have been to watch your life savings plummet in a matter of weeks.

It’s sad because 27% of people who stopped contributing to their 401(k) are the same households that never fully recovered from the financial crisis. They missed the 300% increase that took place in the stock market over the next 10 years.

Getting Involved In The Stock Market

I hate the idea that only the wealthiest among us can take advantage of the benefits of investing in the stock market. If you’re one of the many people with zero dollars in the market and your fear of investing is that the next financial crisis could be around the corner. I have two suggestions that can help you “dip your toes” in the investing waters.

  1. Keep it simple
  2. Start slow

Keep it simple

If the concept of buying stocks is a terrifying prospect to you keep it extremely simple. Don’t start your investing career by buying individual stocks. It’s really difficult to be a successful stock picker. If you are already scared by the stock market, picking the wrong stocks could scare you off for good.

Start off simple with something like an Index Fund. An Index Fund is like buying a unit of the “stock market” not a unit of a single company. It provides you close to the average market return, and you do not have to think about it. if you want to read up more on Index Funds, read this story.

Start Slow

If you have $10,000 that you could invest in the stock market right now, chances are you won’t invest it. Most people are terrified that if they put their $10,000 in the market, another financial crisis would hit and 50% of their money would disappear.

One investing strategy to help with this fear is called “dollar-cost averaging”. Which is an investing strategy where you invest a specified amount over a periodic schedule.

So you have $10,000 but you don’t want to invest it all at once? How about you invest it slowly over the period of two years? You could invest $100 per week over the next 100 weeks. That is an example of dollar-cost averaging.

This removes some of the fear that the market would bottom out one week after you invest the full $10,000. To read up more on the dollar cost averaging approach, read this story.

There is no guarantee with the stock market and it can be a scary experience so the best decision is to sit down with a trustworthy financial advisor who can walk you through the process.

I would love to hear from you. Are you invested in the stock market? If not, why not? If yes, do you DIY your investing or lean on an advisor?

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

Ben Le Fort

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Sharing the money lessons I’ve learned on my journey from debt to Financial Independence. Email me for freelance & Business inquiries:

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

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