More Americans Own Stocks Than Ever Before. That’s Big For The Economy.

More Americans Own Stocks Than Ever Before. That’s Big For The Economy.
Paul Allison, CFA

2 months ago2 mins

Stock investing not only lets you make some side money and exercise that finance class you minored in, but it’s also a source of non-stop learning. And plenty of the US seems to have cottoned on: the Federal Reserve’s 2022 consumer finance survey showed that almost 60% of US households own stocks either directly or through plans like 401(k)s. That’s more than ever before.

Now, I’m no stranger to checking in on my portfolio when markets are on the up. (But on the record, I’d advise investors against lasering in on – and not least reacting to – any blips: being too focused on short-term changes can throw you off your longer-term plans.) That said, when I see that my stocks are doing well, I feel better about my finances. That’s called “the wealth effect”, which is when people feel richer, they’re more likely to splash out. And after the dazzling year that US stocks just had, investors may finally be feeling up to spending.

Historically, it was believed that strong markets helped the economy because stocks were owned by the very richest, who were known as the ones with all the cash to spend. But this chart suggests it’s now more than that, with a broad base of folk owning stocks and getting a taste of that feel-good factor. So if stocks can keep their stride, the US economy may be flushed with a little more cash next year.

As a general takeaway, there’s merit in heeding the warnings of the pros who say to avoid checking your portfolio too regularly. But I, for one, enjoy watching market movements play out in my portfolio (for the most part). And provided you’re conscious of the risks of reacting, and you don’t let your portfolio’s performance influence your decisions, then allowing yourself a little enjoyment from what’s been a wonderful year is completely fine.

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