> the richest 10% of America owns 86% of its stocks
I don't buy that, as a much larger percentage of stock ownership is pension plans, where ordinary people indirectly own stock.
I don't buy that, as a much larger percentage of stock ownership is pension plans, where ordinary people indirectly own stock.
https://www.nytimes.com/2018/02/08/business/economy/stocks-e...
> A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans.
[1] Depends on circumstance, but people are generally supposed to have at least $1,000,000 in savings by 67. https://www.nerdwallet.com/investing/retirement-calculator
That means you chose not to participate in the market, not that you were prevented. In which case I can't accept grousing about not getting the gains from investing in the market.
> retirement-calculator
Use it. It'll show how much you need to invest monthly to retire a millionaire. Your money will do a lot better than double.
You can’t invest money you don’t have.
We can go back and forth about how theoretical people could invest theoretical savings, but unless you have another source, it seems like the reality we live in is one where 90% of the country share 16% of the stock market. Whether that 90% have low savings (all of which are in the market) or better savings (little of which is in the market) - either way their financial health doesn't seem very tied to the market.
You can't separate the two.
The vast majority of businesses are privately held[1]. Those businesses hire most of the people and buy most of the goods. Even for companies that are listed on the markets, the majority of their financial assets come from doing business.
It's true that companies raise money on the public markets to expand and thus hire more people, but the idea that most economic activity happens there is false.
[1] https://www.forbes.com/sites/sageworks/2012/10/01/private-co...
Small businesses are the future big businesses.
Both are needed for an efficient, productive economy.
Various times countries have tried to prevent big business from operating, and always gave it up after a while.
just like voting has no real "impact" right?
Participating has an impact. The impact may not be as big as you'd want, but it's there. and it's better than not participating.
The reason I don't think the voting metaphor holds up is that everyone who's elected does so by "getting" the most votes. Obviously there are forces at work here (turnout, voter suppression, get out the vote efforts, etc), but there's no official alternative way to be elected. The voting comparison would make sense if the stock market was the only possible way to gain money - in which case I would agree! But it's not. There are lots of other ways we can ensure people gain wealth.
Remember that the median income in the US is about 30k. If you have any sort of actual pension plan, there is a good chance you are in the top 10% in terms of net worth.
The low interest rates we've experienced over the last decade, which have only gotten lower as of late, have actually blown up retirement plans.
Used to be, $500,000 saved at 8% meant you could retire off the $40k interest + social security. It also meant that growing a savings account into $500,000 was not out of reach, even on a modest income. This was the plan many people in the 60's, 70's, 80's worked towards.
Now, getting to $500k in savings is much more difficult as compound interest is so much lower. And if you happened to get there, you'd earn a whopping $5000, maybe less, in interest per year.
The best you could hope for is a younger generation of increasingly productive new workers being able to spin off enough profits to provide a return on the capital that generated that productivity. But the demographic time-bomb of relatively few Homelanders supporting relatively many Baby Boomers is going to upend that, and the stagnating productivity of the last couple decades isn't going to help.
Banks use deposits to create loans whose funds go directly to the companies receiving those loans. Banks which interview the loan applicants, review financials, ask for references, and which themselves tend to be pillars of the community (before the proliferation of national banks) and have a vested interest in helping it to thrive.
So, no, your premise is 180 degrees wrong. Savers were once paid high interest rates precisely because their dollars were necessary to directly fund risky investments like a new business or expansion. The bank's function was to determine high vs low risk and allocate depositors' money efficiently. Meanwhile, buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility.
There would be no IPO market without a secondary market. Almost nobody is interested in buying a stock at IPO and holding it forever without being able to sell it.
But they can issue new stock at the inflated values to fund expansion, which itself allows the company to grow profits and potentially grow future dividends. E.g. Tesla stock price quadrupled over the last year and then Tesla issued $2 billion worth of new shares in February.
that's absolutely not true.
The buying stocks (or indirectly via index funds) must mean somebody else is selling.
The person who sold the stocks will put the money obtained from the sale to use somewhere else. It moves capital just like any other economic transaction.
It may be that the seller will "just" buy another stock - and it looks like nothing's changed. But eventually a seller down the chain is either going to invest in something other than stocks (e.g., a bond), buy new IPO stocks, or to consume the money (e.g., retiree selling stocks to fund their living cost).
The problem with banks doing loaning is that they have to be conservative. They cannot loan out money that might not return - since they must return their depositor's money.
Investors, on the other hand, do not have this conservatism (for the right price). That's why stocks exist, and that's why bonds exist (for those willing to risk less than stocks).
The point being, `eanzenberg`'s idea that money in a savings account just sits there idly doing nothing, is false.
after all, a bank cannot invest in risky assets. "eventually down the chain [of stock investments]" is very fast in terms of timing, and i guarantee you it is faster than a bank's loan process for small businesses.
Edit: I think this is the relevant table: https://i.imgur.com/h8Fo8yx.png. If I'm reading it right, this is likely the source of that 84% number. Note the line "Stocks, directly indirectly owned", and the note that it includes retirement plans. I'm guessing this also includes pensions, since that would be a retirement plan. There are many interesting tables in this paper, however.
No need to guess. Google is just a quick click away!
is that still thing for the average american?