NCPA - National Center for Policy Analysis

American Capitalists

February 11, 1998

Americans are putting more of their money into stocks than any other type of assets, including their homes. The proportion of household wealth devoted to stocks has more than doubled just since 1990, according to a study by the New York Times based on Federal Reserve data. Experts say this may be an all-time high.

  • Household wealth devoted to stocks hit 28 percent as of the end of September 1997 -- compared to only 12 percent as recently as 1990.
  • Assets in the form of real estate dropped to 27 percent last year from 33 percent in 1990.
  • Stocks last year accounted for 43 percent of financial assets -- including bank accounts and bonds.
  • As of the end of 1996, employee-controlled pension plans accounted for half of the $3 trillion in corporate pension plans -- up from one-quarter of the total when the 1980s began.

In addition to their commitment to stocks and real estate, as of September 1997 households kept 8 percent of their wealth in durable goods, 12 percent in cash, 11 percent in bonds and 14 percent in small business investments.

Many securities industry professionals are nervous over individual investors' high level of commitment to stocks -- fearing they will cut and run at the next major market downturn.

But a sharp decline in stock prices last October caused many individual investors to pour fresh money into stocks. By contrast, institutional investors were heavy sellers. With the Dow Jones Industrial Average hitting a new high just yesterday, the "little guys" obviously showed more market savvy than the pros four months ago.

Source: Edward Wyatt, "Share of Wealth in Stock Holdings Hits 50-Year High," New York Times, February 11, 1998.

 

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