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Wow, 10% own 84% of all stocks. That's a bit sad. Is it because 90% of Americans don't even have money left to invest after their cost of living? Otherwise, wh

Wow, 10% own 84% of all stocks. That's a bit sad. Is it because 90% of Americans don't even have money left to invest after their cost of living? Otherwise, where are people investing, if not the stock market?

davemp 8y ago
> Otherwise, where are people investing, if not the stock market? Most people's primary investment is their home.
- didibus 8y ago
  I consider your primary home to be included in your cost of living, but maybe it's true. I guess most people can't afford to invest beyond a mortgage on their main residence.
  - deleted 8y ago
    [deleted]
deleted 8y ago
[deleted]
the_gastropod 8y ago
> Is it because 90% of Americans don't even have money left to invest after their cost of living? In part, I think this is true. But "cost of living" is maybe a bit broad. Most of these 90% of Americans have a poor grasp of personal finance, and spend way more on unnecessary crap than they should (car loans, credit card debt, restaurants, alcohol, coffee, cell phone bills, cable tv, etc.). This isn't to say that there aren't systemic problems that increase wealth inequality (there are), but a big part of the problem is just good old fashioned consumerism.
- tindm63 8y ago
  So you can either spend money on useless junk that is advertised to you, or you can buy stocks in the companies that are producing the junk and the ads. What a choice!
  - the_gastropod 8y ago
    Or buy bonds, or real estate, or start a business, or a nuclear bomb shelter, or build a house, or donate to charity, or whatever. These are hardly the only two options.
  - asdffdsa321 8y ago
    Ah, there it is, the condescension that brings down civilizations
- chrischen 8y ago
  Yes but those 10% rich people didn't necessarily get there by avoiding unnecessary crap like coffee or cell phone bills. They most likely got there from legacy or pre-existing accumulated wealth.
  - refurb 8y ago
    Source? From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Those that inherited their massive wealth aren’t that common.
    - Someone1234 8y ago
      > From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Source?
      - toomuchtodo 8y ago
        I happen to be reading "The Millionaire Next Door" [1], and this has some truth to it (statistical excerpts [2]). Most "working class" Millionaires own a small business and are very frugal, continuing to live below their means after obtaining their wealth. Frugality alone will not help you attain the quoted wealth level, but it is a component (along with a healthy income and/or equity/asset ownership). With reference to "common jobs", that would be limited to high income professions, such as doctors and attorneys. [1] https://smile.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1630762504/ https://smile.amazon.com/Millionaire-Next-Door-Surprising-Am... [2] https://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm?noredirect=on https://www.washingtonpost.com/wp-srv/style/longterm/books/c...
    - chrischen 8y ago
      There's also ways to inherit wealth that isn't directly just receiving cash. It can be inheriting your parents' house, car, antiques, or simply inheriting a life that didn't begin in the slums or ghettos.
- thatjsguy 8y ago
  Huge citation needed, if for no other reason than this is consistently used to justify cutting welfare programs for people who actually can’t afford things like health insurance or food. “The poor can’t manage money” has been a popular method of keeping people poor for hundreds of years.
- Someone1234 8y ago
  So that's the latest excuse? Bad financial management? Most American households don't have disposable income, and even the ones that do it is modest. This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic. And why shouldn't middle America enjoy creature comforts? The upper classes certainly do and aren't exactly great at financial planner either with their lifestyle often meeting their income. The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
  - the_gastropod 8y ago
    I understand what I'm saying is easily conflated with what no-empathy libertarian/conservatives say. I'm a Pikkety-reading progressive who absolutely thinks the U.S. government has to consider a wealth tax, increase top marginal tax rates (and add brackets), etc. This does not mean people have 0 responsibility for their finances. Most people can and should do better. > Most American households don't have disposable income This is consistent with what I've said: much of their income could be spent much more efficiently. Transportation and food alone are two areas where a normal American could easily save $10k+/year without any real drop in quality of life. > This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic. 1. Where'd $6k/year come from? 2. Even $6k/year invested at 7% annually nets $1.3M over a normal career. > And why shouldn't middle America enjoy creature comforts? Nobody's saying they shouldn't. Just they should be aware of their cost. At the end of the day, you trade your time for money. It's important to respect that money, and not frit it away on "creature comforts" that don't really bring you any joy. > The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result. Hear hear! I'm with you. Again: this isn't an either-or situation. When you buy expensive high-margin things, you're voluntarily donating your money to the 1%ers. Don't do that.
- gnarcoregrizz 8y ago
  You're right that most Americans have a poor grasp of finance and capitalism - they don't teach it in school. Maybe if more people learned what the game is then they'd play it.
  - deleted 8y ago
    [deleted]
nugget 8y ago
Does this account for state and local workers who have pension plans that are heavily invested in equity markets? I have a family member retired from law enforcement who doesn't own any stock but receives a six figure annual pension from CalPERS, and so has equity exposure indirectly through that portfolio.
rtkwe 8y ago
Is it all that surprising given 40% of American's can't afford a surprise $400 bill? [0] Most people have very little savings period much less money to put in investment accounts. [0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
QML 8y ago
If compound interest is a force to be reckoned with, shouldn’t we expect power law distributions for wealth? 10% owning 84% seems to be the expectation then. This reminds me of an Atlantic article lamenting the “9.9%” [1]. [1] https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/ https://www.theatlantic.com/magazine/archive/2018/06/the-bir...
ben509 8y ago
> Is it because 90% of Americans don't even have money left to invest after their cost of living? It's because it doesn't take all that much to live on when you retire, and to have more money requires working longer. Especially, most retirees get big efficiencies from using tax-advantaged accounts, so you have less invested, but you get more out of it. Those accounts have contribution limits, so they don't scale up for the big investors. I work on goal-based financial planning, and one of the key things people want is to retire sooner, which means saving less. If your financial plan was perfect, you'd drop dead with exactly the amount you want to bequest to heirs / charities in your portfolio and not a penny more.
simonsarris 8y ago
Now many people have no money and are scraping by, and many(!) people are extremely bad with money, even fairly middle class people who cannot commit to saving anything and would rather the BMW, but... > 10% own 84% sounds more like simple power law. "A small wealthy % owns most of the X" is true for, well, almost everything. So when you ponder: > Is it because 90% of Americans don't even have money left to invest after their cost of living? The answer is "probably not." Because even if every american invested exactly 5% of their income in the stock market, or 50% of their income, you'd still expect to see ~10% own 84% of all stock. The 10% just have really high incomes/previous savings from incomes, etc. In fact just ponder for a laugh, imagine if the 10% [richest people] only owned like... 15% of the stock market, or owned only like 15% of all real estate, etc. If that were true, you should be really worried about that thing as an investment! Bitcoin might actually be the rare case where the top 10% don't actually own a huge share of a big valuable thing. > Otherwise, where are people investing, if not the stock market? The bottom 90% own most of the lotto tickets. The top 10% eschew these! The top 10% prefer index/hedge funds, which are basically lotto tickets with great odds and a totally lame ROI. There is probably lots of value in convincing people to invest in the index fund lotto instead of the lotto lotto, but even if you did, about 10% would still own about 84% of all stock.
- didibus 8y ago
  Hum, plausible, but I'm not sure I fully see it. How is the stock market an exponential investment? If you look at the growth of the stock since the beginning, and of most company stock, isn't it much more a linear growth? So where would this power distribution come from?
  - simonsarris 8y ago
    Anything with some kind of returns that you can put back into it will exhibit compounding interest. True of real estate or stocks or even just bank deposits. Even if a stock price goes nowhere but pays a 5% dividend (I'm looking at you, RDSA) It is trivially true in real estate (Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.) Why wouldn't it be true in a market where the returns have been higher than real estate?

davemp 8y ago

> Otherwise, where are people investing, if not the stock market? Most people's primary investment is their home.

didibus 8y ago
I consider your primary home to be included in your cost of living, but maybe it's true. I guess most people can't afford to invest beyond a mortgage on their main residence.
- deleted 8y ago
  [deleted]

deleted 8y ago

[deleted]

the_gastropod 8y ago

> Is it because 90% of Americans don't even have money left to invest after their cost of living? In part, I think this is true. But "cost of living" is maybe a bit broad. Most of these 90% of Americans have a poor grasp of personal finance, and spend way more on unnecessary crap than they should (car loans, credit card debt, restaurants, alcohol, coffee, cell phone bills, cable tv, etc.). This isn't to say that there aren't systemic problems that increase wealth inequality (there are), but a big part of the problem is just good old fashioned consumerism.

tindm63 8y ago
So you can either spend money on useless junk that is advertised to you, or you can buy stocks in the companies that are producing the junk and the ads. What a choice!
- the_gastropod 8y ago
  Or buy bonds, or real estate, or start a business, or a nuclear bomb shelter, or build a house, or donate to charity, or whatever. These are hardly the only two options.
- asdffdsa321 8y ago
  Ah, there it is, the condescension that brings down civilizations
chrischen 8y ago
Yes but those 10% rich people didn't necessarily get there by avoiding unnecessary crap like coffee or cell phone bills. They most likely got there from legacy or pre-existing accumulated wealth.
- refurb 8y ago
  Source? From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Those that inherited their massive wealth aren’t that common.
  - Someone1234 8y ago
    > From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Source?
    - toomuchtodo 8y ago
      I happen to be reading "The Millionaire Next Door" [1], and this has some truth to it (statistical excerpts [2]). Most "working class" Millionaires own a small business and are very frugal, continuing to live below their means after obtaining their wealth. Frugality alone will not help you attain the quoted wealth level, but it is a component (along with a healthy income and/or equity/asset ownership). With reference to "common jobs", that would be limited to high income professions, such as doctors and attorneys. [1] https://smile.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1630762504/ https://smile.amazon.com/Millionaire-Next-Door-Surprising-Am... [2] https://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm?noredirect=on https://www.washingtonpost.com/wp-srv/style/longterm/books/c...
  - chrischen 8y ago
    There's also ways to inherit wealth that isn't directly just receiving cash. It can be inheriting your parents' house, car, antiques, or simply inheriting a life that didn't begin in the slums or ghettos.
thatjsguy 8y ago
Huge citation needed, if for no other reason than this is consistently used to justify cutting welfare programs for people who actually can’t afford things like health insurance or food. “The poor can’t manage money” has been a popular method of keeping people poor for hundreds of years.
Someone1234 8y ago
So that's the latest excuse? Bad financial management? Most American households don't have disposable income, and even the ones that do it is modest. This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic. And why shouldn't middle America enjoy creature comforts? The upper classes certainly do and aren't exactly great at financial planner either with their lifestyle often meeting their income. The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
- the_gastropod 8y ago
  I understand what I'm saying is easily conflated with what no-empathy libertarian/conservatives say. I'm a Pikkety-reading progressive who absolutely thinks the U.S. government has to consider a wealth tax, increase top marginal tax rates (and add brackets), etc. This does not mean people have 0 responsibility for their finances. Most people can and should do better. > Most American households don't have disposable income This is consistent with what I've said: much of their income could be spent much more efficiently. Transportation and food alone are two areas where a normal American could easily save $10k+/year without any real drop in quality of life. > This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic. 1. Where'd $6k/year come from? 2. Even $6k/year invested at 7% annually nets $1.3M over a normal career. > And why shouldn't middle America enjoy creature comforts? Nobody's saying they shouldn't. Just they should be aware of their cost. At the end of the day, you trade your time for money. It's important to respect that money, and not frit it away on "creature comforts" that don't really bring you any joy. > The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result. Hear hear! I'm with you. Again: this isn't an either-or situation. When you buy expensive high-margin things, you're voluntarily donating your money to the 1%ers. Don't do that.
gnarcoregrizz 8y ago
You're right that most Americans have a poor grasp of finance and capitalism - they don't teach it in school. Maybe if more people learned what the game is then they'd play it.
- deleted 8y ago
  [deleted]

nugget 8y ago

Does this account for state and local workers who have pension plans that are heavily invested in equity markets? I have a family member retired from law enforcement who doesn't own any stock but receives a six figure annual pension from CalPERS, and so has equity exposure indirectly through that portfolio.

rtkwe 8y ago

Is it all that surprising given 40% of American's can't afford a surprise $400 bill? [0] Most people have very little savings period much less money to put in investment accounts. [0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...

QML 8y ago

If compound interest is a force to be reckoned with, shouldn’t we expect power law distributions for wealth? 10% owning 84% seems to be the expectation then. This reminds me of an Atlantic article lamenting the “9.9%” [1]. [1] https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/ https://www.theatlantic.com/magazine/archive/2018/06/the-bir...

ben509 8y ago

> Is it because 90% of Americans don't even have money left to invest after their cost of living? It's because it doesn't take all that much to live on when you retire, and to have more money requires working longer. Especially, most retirees get big efficiencies from using tax-advantaged accounts, so you have less invested, but you get more out of it. Those accounts have contribution limits, so they don't scale up for the big investors. I work on goal-based financial planning, and one of the key things people want is to retire sooner, which means saving less. If your financial plan was perfect, you'd drop dead with exactly the amount you want to bequest to heirs / charities in your portfolio and not a penny more.

simonsarris 8y ago

Now many people have no money and are scraping by, and many(!) people are extremely bad with money, even fairly middle class people who cannot commit to saving anything and would rather the BMW, but... > 10% own 84% sounds more like simple power law. "A small wealthy % owns most of the X" is true for, well, almost everything. So when you ponder: > Is it because 90% of Americans don't even have money left to invest after their cost of living? The answer is "probably not." Because even if every american invested exactly 5% of their income in the stock market, or 50% of their income, you'd still expect to see ~10% own 84% of all stock. The 10% just have really high incomes/previous savings from incomes, etc. In fact just ponder for a laugh, imagine if the 10% [richest people] only owned like... 15% of the stock market, or owned only like 15% of all real estate, etc. If that were true, you should be really worried about that thing as an investment! Bitcoin might actually be the rare case where the top 10% don't actually own a huge share of a big valuable thing. > Otherwise, where are people investing, if not the stock market? The bottom 90% own most of the lotto tickets. The top 10% eschew these! The top 10% prefer index/hedge funds, which are basically lotto tickets with great odds and a totally lame ROI. There is probably lots of value in convincing people to invest in the index fund lotto instead of the lotto lotto, but even if you did, about 10% would still own about 84% of all stock.

didibus 8y ago
Hum, plausible, but I'm not sure I fully see it. How is the stock market an exponential investment? If you look at the growth of the stock since the beginning, and of most company stock, isn't it much more a linear growth? So where would this power distribution come from?
- simonsarris 8y ago
  Anything with some kind of returns that you can put back into it will exhibit compounding interest. True of real estate or stocks or even just bank deposits. Even if a stock price goes nowhere but pays a 5% dividend (I'm looking at you, RDSA) It is trivially true in real estate (Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.) Why wouldn't it be true in a market where the returns have been higher than real estate?