6 ms·

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

bb2018 6y ago
While a modest fraction of people trade individual stocks, a lot of Americans have some type of 401k, pension, or retirement account that is tied to the stock market. This pegs it at 50% of private sector workers and 80% of public sector workers. https://www.pensionrights.org/publications/statistic/how-many-american-workers-participate-workplace-retirement-plans https://www.pensionrights.org/publications/statistic/how-man... Additionally, in many cases, couples may just have one person with access or contributions to the market - but this still leaves them exposed (for good and bad) to the market.
- anthony_doan 6y ago
  Pension are 403b which is 401k equivalent just fyi. I'm on it current shift toward tbill/bonds.
kitotik 6y ago
Because many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.
- mobilefriendly 6y ago
  There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.
  - elros 6y ago
    Well, you can't live inside stock certificates :-)
  - kitotik 6y ago
    Sorry I’m not sure I understand the point you are making. Most models have the numbers of Americans living in poverty or lower class as above 50% of the US population. It’s unlikely if even what they term “lower-middle class” owns real estate.
    - SpicyLemonZest 6y ago
      Any model describing the median American as “lower class” is being unreasonable. Most Americans - not all, but most - live a comfortable life.
      - kitotik 6y ago
        Citation needed. “Comfortable” is obviously subjective, but the discussion was around ownership of stocks. Even these[0] models have it at >=50% and they are at least 15 years old, and disparity has only increased since then. [0] https://en.wikipedia.org/wiki/Demographics_of_the_United_States https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta...
      - karatestomp 6y ago
        One annual out-of-pocket max (broken arm, bad fall, car wreck, appendicitis, pregnancy) away from having your financial plans disrupted for a couple years isn’t comfortable. One of those plus any one other problem at the same time from severe financial distress (maybe lose home, maybe bankruptcy) isn’t comfortable. No matter how many x-boxes you have.
  - tathougies 6y ago
    > , and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing. Given that stock ownership is about 55% of the public, the median household likely has at least a few shares. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own...
    - kitotik 6y ago
      That includes 401k and IRAs etc. which obviously very few living outside of middle class have. In addition, stock ownership has been on steady decline for everyone but the upper middle class.
      - tathougies 6y ago
        Well you're not wrong on the overall trend over the past twenty years, but over the past four or five, the rate has been trending upward. Most of the downward movement was during the recession, for which it's not obvious that the reason ownership went down is not mainly panic selling (i.e., individual choice and risk tolerance) instead of anything systemic.
  - refurb 6y ago
    I know plenty of middle class people who stay away from stocks - they don't understand them and view them as very risky investments. They stick with bonds and such.
    - icedchai 6y ago
      The sad truth is many folks are afraid of investing. Much of the financial services industry is built off this. How many financial advisor offices do you see around? Instead of educating themselves, they'd rather pay a "professional" who often does no better than they'd do themselves if they just stuck to simple index funds.
    - chii 6y ago
      > they don't understand them and view them as very risky investments. which is a shame. Stocks (or owning businesses in general) is the real way to get out of the rat race. I wish that financial education is part of the standard school curriculum. Financial education such as what stocks are, what bonds are, and how do you "save" money and budget, and what it means to invest and what risks "mean" etc Most people are scared of stocks because they think it's "risky" - they'll lose all their money if the company bankrupts. While that's true, the other factors not considered is inflation risk (of bonds or, of bank savings account). The risk of not investing for the long term is just as bad.
awinder 6y ago
Man this site is harsh some times, I think there is a lot of depth to this question. It’s easy to look at statistics and say that it’s because of massive wealth imbalances and that is 100% an accurate statement. But from experience / polling there’s also a ton of people who have bad financial hygiene, people who could & should be way more invested and aren’t. So I think there’s also very big educational issues at play / wealth imbalance glosses over a lot of smaller but still important issues.
- kazen44 6y ago
  Also, what if people don't want to be part of the very system which causes wealth inbalance? or is the stockmarket a "the only way to lose is not to play" kind of deal?
  - awinder 6y ago
    The not being a part of a system bit is tricky. One of the more exciting emergent trends in finance imo is ESG etfs which pick stocks based on good environmental, social and corporate governance criteria. So there is already this idea that capital should have organization patterns for people who value this & I hope that iterates in really positive ways. But yeah I’d trend towards “the only way to lose is not to play” side of things. It’s really hard to find other ways to efficiently save/grow your money, interest rates are crushed for saving money outside of the market.
    - kazen44 6y ago
      the sad part about "the only way to lose is not to play", is that playing in this case further entrenches the very system which requires you to effectively play in the first place. There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder.
      - chii 6y ago
        > There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder. getting water to flow up hill is massively hard. And in the foreseeable future, not possible. Until the day humanity discovers unlimited energy and move into a post scarcity society. So play the game as much and as well as you can, and build up wealth for your family and future family. That's the only move left, unless you want to sacrifice yourself and your family's financial well-being for a cause that you nor your children will benefit from.
grecy 6y ago
37% of Americans struggle with hunger [1] and 57% of Americans have less than $1000 in savings. [2] Would you be buying stocks if you didn't have enough to eat? [1] https://www.feedingamerica.org/hunger-in-america/facts https://www.feedingamerica.org/hunger-in-america/facts [2] https://finance.yahoo.com/news/58-americans-less-1-000-090000503.html https://finance.yahoo.com/news/58-americans-less-1-000-09000... EDIT: Apologies, first should be 37 million Americans (NOT 37%)
- AuryGlenz 6y ago
  It probably doesn’t apply to those struggling with hunger, but just because people don’t have savings doesn’t mean they don’t have expendable income. It could just as easily mean they prioritized stuff over savings, and I bet that’s the case for most of them.
  - sigstoat 6y ago
    https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...
    - mlthoughts2018 6y ago
      That’s an average per consumer. It’s likely skewed way up by extreme outliers. Need to see median, 75th percentile, 95th percentile to really understand it. The headline seems like deliberately misleading journalism.
      - jandrewrogers 6y ago
        Per the US government, the median American household has more than $12,000 per year in cash to burn after all ordinary expenses. That is a lot of money for savings and/or beer.
- chockablock 6y ago
  Your link [1] says 37 million Americans, which is 11%, not 37%. (Still a shocking #!)
nullc 6y ago
If your net worth is negative servicing your debts has a better risk adjusted return than investing in stocks unless the interest rates on your debt are extremely low.
- kelnos 6y ago
  Yup. If you have a bunch of credit card debt at 20+%, and/or are paying off a car in the high-single-digit percent range, then you really want to pay that off before you consider investments. If all you have is a sub-5% mortgage (though even that's pushing it), or a low-interest student loan, then you should put money toward retirement if you can. On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (making regular payments, of course), for peace of mind I paid it off as quickly as a could. I think a lot of people are in that boat, or worse, having been taught that all debt is bad for you.
  - nullc 6y ago
    >On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt ( Right, but near or sub inflation rate student loans are mostly a non-existent thing anymore. They're much more likely to be at 8% and because of their special treatment in bankruptcy they're usually better to pay down than other loans at similar rates. As a child I learned how to compute compound interest then shortly after saw a TV advertisement for some kind of predatory loan (not sure if there were payday loan places in the late 80s/1990, but something like that), did the math and for a long time thought all loans were essentially scams (not realizing that the interest rates of payday loans weren't representative). ... it turned out to serve me well: there are worse financial mishaps you could make than avoiding reasonable debt. :)
everybodyknows 6y ago
For small investors, I suggest US Treasury I-bonds: inflation protected, liquid after one year. This of course is, after paying off all high-rate debt, and maxing out 401k contributions.
- seanmcdirmid 6y ago
  You have to put your 401k contributions somewhere, even if it is selecting your plan’s auto pilot option.
- agilebyte 6y ago
  For anyone looking, the term is "Real Return Bonds". And if you are in Canada watch out, there are not as many of them and the average maturity is quite high so you can expect some wild swings (e.g. XRB ETF).
- vecinu 6y ago
  Yeah check the rates on I-bonds right now, they went down 1% this month. It's not even worth it anymore. I was earning 2.55% APY now it's barely 1.5%. You can get the same return in an AMEX savings account.
kube-system 6y ago
Who said they were inaccessible?
closeparen 6y ago
Because the priority order is: a) Consumption spending b) Real estate c) Stocks When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks. Making sacrifices on housing in favor of your stock portfolio is of course possible, but will get you a lot of weird looks and pressure from family, particularly if kids are involved.
- ericd 6y ago
  Do people actually get family pressure to remodel their kitchen?
  - karatestomp 6y ago
    My wife’s side pressure her (me) to “upgrade” her wedding set every few years. WTF. They’re terrible with money, of course, and constantly make passive-aggressive comments about who’s spending what. I don’t think they even realize they’re doing it, it’s just a really, really awful and deeply middle-class-anxiety attitude they’re stuck in.
    - zwappt 6y ago
      LOL me too. They know I have rental properties but are always bitching about my small house and why I am not doing this or that. They don't know that my real estate portfolio is worth upwards of $5 million and when the mortgages start to be paid down, will eventually be generating $20,000 a month in rent. Look forward to telling them to get fucked when they come looking for some of that money.
    - ericd 6y ago
      Heh I had to look up what a wedding set was. Upgrade... wedding rings? Isn’t a big part of the symbolism the permanence factor of the rings? The symbolism of upgrading the ring seems a bit unfortunate... Anyway, sorry to hear, that probably gets really old.
Glyptodon 6y ago
Having stocks is definitely better now than when I was younger. Fun story: I was interested in investing as a kid, family member opened an account for me as a minor, with enough money to pick one investment to buy and hold. It had a bad month, account went below some threshold minimum balance I didn't know about (I'm sure it said somewhere, I didn't get to choose who the account was through), and suddenly account provider started liquidating shares every month for an account fee because of a balance below some amount, and we ended up having to close the account at a loss to avoid fees eventually wiping it out. Obviously a lot of lessons packed in there, but at the time it seemed obvious that the whole system was designed to prevent regular folks who couldn't just start with many $k accounts from buying and holding. Now there are tons of low cost options for things like robo-investors, ETFs and index funds, monthly low value investing, etc. It's a whole different world, which on one hand is nice, but on the other leaves me with the feeling that "regular" investments are some kind of loss-leader or tool to enable some other means of profiting the big players.
rewgs 6y ago
In addition to everything else said in this thread -- all good stuff -- it's worth noting that there's often an upfront expense that's hard to overcome in order to invest in the stock market in any sort of meaningful way. For example, some of the stocks recommended by the likes of Mr Money Mustache require a $3,000 minimum first-time investment. That's a big hurdle for some, myself included. I'm in music and media, not tech, and while my income is pretty solid, my overhead is absurdly high relative to it. Putting aside $3k on top of doing the financially responsible things like maintaining rainy day funds, saving for retirement, etc, is just tough.
- reducesuffering 6y ago
  MMM is definitely recommending Vanguard mutual funds, either VFIAX (US 500 biggest) or VTSMX (total US market). But the ETF's are equivalent and can be purchased fractionally literally $1 at a time. I.e: Open robinhood brokerage, purchase $1 of VTI (ETF equivalent of VTSMX)

bb2018 6y ago

While a modest fraction of people trade individual stocks, a lot of Americans have some type of 401k, pension, or retirement account that is tied to the stock market. This pegs it at 50% of private sector workers and 80% of public sector workers. https://www.pensionrights.org/publications/statistic/how-many-american-workers-participate-workplace-retirement-plans https://www.pensionrights.org/publications/statistic/how-man... Additionally, in many cases, couples may just have one person with access or contributions to the market - but this still leaves them exposed (for good and bad) to the market.

anthony_doan 6y ago
Pension are 403b which is 401k equivalent just fyi. I'm on it current shift toward tbill/bonds.

kitotik 6y ago

Because many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.

mobilefriendly 6y ago
There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.
- elros 6y ago
  Well, you can't live inside stock certificates :-)
- kitotik 6y ago
  Sorry I’m not sure I understand the point you are making. Most models have the numbers of Americans living in poverty or lower class as above 50% of the US population. It’s unlikely if even what they term “lower-middle class” owns real estate.
  - SpicyLemonZest 6y ago
    Any model describing the median American as “lower class” is being unreasonable. Most Americans - not all, but most - live a comfortable life.
    - kitotik 6y ago
      Citation needed. “Comfortable” is obviously subjective, but the discussion was around ownership of stocks. Even these[0] models have it at >=50% and they are at least 15 years old, and disparity has only increased since then. [0] https://en.wikipedia.org/wiki/Demographics_of_the_United_States https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta...
    - karatestomp 6y ago
      One annual out-of-pocket max (broken arm, bad fall, car wreck, appendicitis, pregnancy) away from having your financial plans disrupted for a couple years isn’t comfortable. One of those plus any one other problem at the same time from severe financial distress (maybe lose home, maybe bankruptcy) isn’t comfortable. No matter how many x-boxes you have.
- tathougies 6y ago
  > , and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing. Given that stock ownership is about 55% of the public, the median household likely has at least a few shares. https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx https://news.gallup.com/poll/266807/percentage-americans-own...
  - kitotik 6y ago
    That includes 401k and IRAs etc. which obviously very few living outside of middle class have. In addition, stock ownership has been on steady decline for everyone but the upper middle class.
    - tathougies 6y ago
      Well you're not wrong on the overall trend over the past twenty years, but over the past four or five, the rate has been trending upward. Most of the downward movement was during the recession, for which it's not obvious that the reason ownership went down is not mainly panic selling (i.e., individual choice and risk tolerance) instead of anything systemic.
- refurb 6y ago
  I know plenty of middle class people who stay away from stocks - they don't understand them and view them as very risky investments. They stick with bonds and such.
  - icedchai 6y ago
    The sad truth is many folks are afraid of investing. Much of the financial services industry is built off this. How many financial advisor offices do you see around? Instead of educating themselves, they'd rather pay a "professional" who often does no better than they'd do themselves if they just stuck to simple index funds.
  - chii 6y ago
    > they don't understand them and view them as very risky investments. which is a shame. Stocks (or owning businesses in general) is the real way to get out of the rat race. I wish that financial education is part of the standard school curriculum. Financial education such as what stocks are, what bonds are, and how do you "save" money and budget, and what it means to invest and what risks "mean" etc Most people are scared of stocks because they think it's "risky" - they'll lose all their money if the company bankrupts. While that's true, the other factors not considered is inflation risk (of bonds or, of bank savings account). The risk of not investing for the long term is just as bad.

awinder 6y ago

Man this site is harsh some times, I think there is a lot of depth to this question. It’s easy to look at statistics and say that it’s because of massive wealth imbalances and that is 100% an accurate statement. But from experience / polling there’s also a ton of people who have bad financial hygiene, people who could & should be way more invested and aren’t. So I think there’s also very big educational issues at play / wealth imbalance glosses over a lot of smaller but still important issues.

kazen44 6y ago
Also, what if people don't want to be part of the very system which causes wealth inbalance? or is the stockmarket a "the only way to lose is not to play" kind of deal?
- awinder 6y ago
  The not being a part of a system bit is tricky. One of the more exciting emergent trends in finance imo is ESG etfs which pick stocks based on good environmental, social and corporate governance criteria. So there is already this idea that capital should have organization patterns for people who value this & I hope that iterates in really positive ways. But yeah I’d trend towards “the only way to lose is not to play” side of things. It’s really hard to find other ways to efficiently save/grow your money, interest rates are crushed for saving money outside of the market.
  - kazen44 6y ago
    the sad part about "the only way to lose is not to play", is that playing in this case further entrenches the very system which requires you to effectively play in the first place. There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder.
    - chii 6y ago
      > There is very little, if even any way to recourse this without massive societal change. And getting such change in action is even harder. getting water to flow up hill is massively hard. And in the foreseeable future, not possible. Until the day humanity discovers unlimited energy and move into a post scarcity society. So play the game as much and as well as you can, and build up wealth for your family and future family. That's the only move left, unless you want to sacrifice yourself and your family's financial well-being for a cause that you nor your children will benefit from.

grecy 6y ago

37% of Americans struggle with hunger [1] and 57% of Americans have less than $1000 in savings. [2] Would you be buying stocks if you didn't have enough to eat? [1] https://www.feedingamerica.org/hunger-in-america/facts https://www.feedingamerica.org/hunger-in-america/facts [2] https://finance.yahoo.com/news/58-americans-less-1-000-090000503.html https://finance.yahoo.com/news/58-americans-less-1-000-09000... EDIT: Apologies, first should be 37 million Americans (NOT 37%)

AuryGlenz 6y ago
It probably doesn’t apply to those struggling with hunger, but just because people don’t have savings doesn’t mean they don’t have expendable income. It could just as easily mean they prioritized stuff over savings, and I bet that’s the case for most of them.
- sigstoat 6y ago
  https://www.cnbc.com/2019/12/12/americans-spend-over-1000-dollars-a-year-on-lotto-tickets.html https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...
  - mlthoughts2018 6y ago
    That’s an average per consumer. It’s likely skewed way up by extreme outliers. Need to see median, 75th percentile, 95th percentile to really understand it. The headline seems like deliberately misleading journalism.
    - jandrewrogers 6y ago
      Per the US government, the median American household has more than $12,000 per year in cash to burn after all ordinary expenses. That is a lot of money for savings and/or beer.
chockablock 6y ago
Your link [1] says 37 million Americans, which is 11%, not 37%. (Still a shocking #!)

nullc 6y ago

If your net worth is negative servicing your debts has a better risk adjusted return than investing in stocks unless the interest rates on your debt are extremely low.

kelnos 6y ago
Yup. If you have a bunch of credit card debt at 20+%, and/or are paying off a car in the high-single-digit percent range, then you really want to pay that off before you consider investments. If all you have is a sub-5% mortgage (though even that's pushing it), or a low-interest student loan, then you should put money toward retirement if you can. On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (making regular payments, of course), for peace of mind I paid it off as quickly as a could. I think a lot of people are in that boat, or worse, having been taught that all debt is bad for you.
- nullc 6y ago
  >On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt ( Right, but near or sub inflation rate student loans are mostly a non-existent thing anymore. They're much more likely to be at 8% and because of their special treatment in bankruptcy they're usually better to pay down than other loans at similar rates. As a child I learned how to compute compound interest then shortly after saw a TV advertisement for some kind of predatory loan (not sure if there were payday loan places in the late 80s/1990, but something like that), did the math and for a long time thought all loans were essentially scams (not realizing that the interest rates of payday loans weren't representative). ... it turned out to serve me well: there are worse financial mishaps you could make than avoiding reasonable debt. :)

everybodyknows 6y ago

For small investors, I suggest US Treasury I-bonds: inflation protected, liquid after one year. This of course is, after paying off all high-rate debt, and maxing out 401k contributions.

seanmcdirmid 6y ago
You have to put your 401k contributions somewhere, even if it is selecting your plan’s auto pilot option.
agilebyte 6y ago
For anyone looking, the term is "Real Return Bonds". And if you are in Canada watch out, there are not as many of them and the average maturity is quite high so you can expect some wild swings (e.g. XRB ETF).
vecinu 6y ago
Yeah check the rates on I-bonds right now, they went down 1% this month. It's not even worth it anymore. I was earning 2.55% APY now it's barely 1.5%. You can get the same return in an AMEX savings account.

kube-system 6y ago

Who said they were inaccessible?

closeparen 6y ago

Because the priority order is: a) Consumption spending b) Real estate c) Stocks When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks. Making sacrifices on housing in favor of your stock portfolio is of course possible, but will get you a lot of weird looks and pressure from family, particularly if kids are involved.

ericd 6y ago
Do people actually get family pressure to remodel their kitchen?
- karatestomp 6y ago
  My wife’s side pressure her (me) to “upgrade” her wedding set every few years. WTF. They’re terrible with money, of course, and constantly make passive-aggressive comments about who’s spending what. I don’t think they even realize they’re doing it, it’s just a really, really awful and deeply middle-class-anxiety attitude they’re stuck in.
  - zwappt 6y ago
    LOL me too. They know I have rental properties but are always bitching about my small house and why I am not doing this or that. They don't know that my real estate portfolio is worth upwards of $5 million and when the mortgages start to be paid down, will eventually be generating $20,000 a month in rent. Look forward to telling them to get fucked when they come looking for some of that money.
  - ericd 6y ago
    Heh I had to look up what a wedding set was. Upgrade... wedding rings? Isn’t a big part of the symbolism the permanence factor of the rings? The symbolism of upgrading the ring seems a bit unfortunate... Anyway, sorry to hear, that probably gets really old.

Glyptodon 6y ago

Having stocks is definitely better now than when I was younger. Fun story: I was interested in investing as a kid, family member opened an account for me as a minor, with enough money to pick one investment to buy and hold. It had a bad month, account went below some threshold minimum balance I didn't know about (I'm sure it said somewhere, I didn't get to choose who the account was through), and suddenly account provider started liquidating shares every month for an account fee because of a balance below some amount, and we ended up having to close the account at a loss to avoid fees eventually wiping it out. Obviously a lot of lessons packed in there, but at the time it seemed obvious that the whole system was designed to prevent regular folks who couldn't just start with many $k accounts from buying and holding. Now there are tons of low cost options for things like robo-investors, ETFs and index funds, monthly low value investing, etc. It's a whole different world, which on one hand is nice, but on the other leaves me with the feeling that "regular" investments are some kind of loss-leader or tool to enable some other means of profiting the big players.

rewgs 6y ago

In addition to everything else said in this thread -- all good stuff -- it's worth noting that there's often an upfront expense that's hard to overcome in order to invest in the stock market in any sort of meaningful way. For example, some of the stocks recommended by the likes of Mr Money Mustache require a $3,000 minimum first-time investment. That's a big hurdle for some, myself included. I'm in music and media, not tech, and while my income is pretty solid, my overhead is absurdly high relative to it. Putting aside $3k on top of doing the financially responsible things like maintaining rainy day funds, saving for retirement, etc, is just tough.

reducesuffering 6y ago
MMM is definitely recommending Vanguard mutual funds, either VFIAX (US 500 biggest) or VTSMX (total US market). But the ETF's are equivalent and can be purchased fractionally literally $1 at a time. I.e: Open robinhood brokerage, purchase $1 of VTI (ETF equivalent of VTSMX)