It’s February 1 and the last day to include an overview of a story in Research Magazine’s February issue as highlighted by Advisor One. Today’s article is on why middle class investors are afraid of equities.
Equity investing used to be a major component of middle class retirement investing. The 1990s were a time when the nation was proud to be a shareholding society.
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Back in the days of World War II, the middle class was the stalwart backbone of America.
By 2002, 67% of American households owned stocks. Even as the markets recovered from the burst of the Internet bubble, the percentage of stock market investors began to dwindle.
Equity ownership spiked again briefly in 2007 but, by 2011, it had tumbled to only 54%.
Now, the middle class is eroding, with many leaving the work force and jumping off the upward mobility ladder.
The opposite is true for the wealthy. Equity ownership among the top 1% increased from 33.5% in 2001 to 38.3% in 2007.
The next 19% of the income ladder decreased their holdings by 3% to 52.8%. The bottom 80% of holders reduced their ownership from 10.7% to 8.9%.
Interestingly, these trends of the middle class to reduce equity ownership and also to disengage from core economic processes started long before the 2008 crisis.
This counters the Wall Street view that the reduction in equity trading volumes is based on technical factors such as the growth of other trading platforms. It could simply be that there are fewer market players.
Yet regulatory adjustments over the past few years have made the equity markets once-again retail-investor friendly.
Recent market champions like Google and Apple may illustrate why retail involvement
has waned. Their share prices are prohibitive, even for a 100-share lot. The share prices also reflect a cavalier attitude to small investors.