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Money and Markets: Investing Insights

The Rich Get Richer — and Whose Fault is That?

Tony Sagami | Wednesday, November 15, 2017 at 7:30 am

Tony Sagami

“Our findings show a deeply unbalanced economy. The lion’s share of the nation’s wealth remains in a tiny number of hands.”

— Institute for Policy Studies, November 2017

Is the stock market overvalued? Is it set for a big fall? Nobody has a crystal ball, but there is no question that the market has been on a roll.

The Dow Jones Industrial Average has made new record highs more than 70 times since Donald Trump was elected and the S&P 500 has set 52 all-time highs so far this year.

With an “average” portfolio of the “average” American valued at $344,500, a lot of people should be feeling pretty good about their financial situation.

Trump isn’t shy about taking credit for the bull market, but the unfortunate reality is that a small percentage of Americans are profiting from the rally.

According to the pollsters at Gallup, a smaller and smaller percentage of Americans have profited from the raging bull market. That’s because so few Americans are invested in stocks.

Despite the widespread adoption of 401(k)s, only 52% of Americans have any money invested in the stock market. That’s the lowest ratio since Gallup started collecting stock ownership data in 1998.



Click image for larger view

And even that woefully low stock ownership percentage is misleading. That’s because 92% of the top 10% of American wage earners who own stocks have an average portfolio of almost $1 million ($969,000).

Only 8% of the bottom 80% of wage earners, which include both the middle and lower classes, are invested in the stock market. No wonder the rich are getting richer.



Click image for larger view

The Federal Reserve reported that the top 1% of Americans pulled in a record-high 23.8% of the total income in 2016, up from 20.3% in 2013. And twice as much as in 1992.

That Grand Canyon-sized gap in stock ownership and income between the rich and the rest of America really shows up in net worth. Or lack thereof.

The Institute for Policy Studies reported that 19% of households — nearly one out of every five — have zero savings and a negative net worth.

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On the other end, the wealthy end, the richest 1% of Americans own 38% of our country’s wealth.

There is no shortage of people or institutions to blame. But I feel the single best solution to narrowing the wealth gap will come from 401(k)s and other tax-favored retirement plans.

The U.S. Census Bureau says that a whopping two-thirds of Americans don’t put a penny into their 401(k)s. They could … but they don’t.

And given the company match that many, if not most, employers offer, failing to participate in a 401(k) is a deadly financial mistake.

If you’re reading this column, you have probably stashed money into a 401(k) for years. But be sure to take the time to talk to your children and/or grandchildren so that they do, too.

Otherwise, they could stay stuck in the “have-not” group for the rest of their lives.

Best wishes,

Tony Sagami

{ 11 comments }

randy young Wednesday, November 15, 2017 at 7:42 am

I want in on this , contact me

Phil Wednesday, November 15, 2017 at 8:05 am

My wife’s employer provides a retirement fund contribution based on her salary, irrespective of whether or not she contributes from her salary. While this seems generous, in reality it allows employees to underfund their retirement savings. I wonder how many organizations/companies follow this contribution approach.

harold Wednesday, November 15, 2017 at 8:05 am

Maybe it’s me but I am dumbfounded that so many American workers do not max-out or even participate in their 401(k)’s……for years now, I have been maxing-out my 401k and maxing-out my “catch-up” amount. Now, trust me, I’m no where near the top 1%ers but my wife and I are slowly but steadily building our nest egg past the 1M mark….slow and steady is the “secret”.

Maryus Hogge Wednesday, November 15, 2017 at 8:59 am

Most of your writing is about the stock market and you know as well as I even the best group of stocks over time is risky. I realize you can make money in the market but you have to manage your own account and keep the crooks out of your process. Financial analysts are out to make money for themselves. A large percent of people in the lower percent has little education and poor jobs or on assistance. How can this group invest in the market or any other investment. Try writing about small real estate investment. In my opinion small real estate investment that are not leveraged is a better investment than stocks

Henry Winkleman Wednesday, November 15, 2017 at 10:11 am

The only way I could enjoy retirement the way iI wanted to was through my 401(k).

Alain Wednesday, November 15, 2017 at 10:43 am

What a good article!
Thanks,

Living Frugal Wednesday, November 15, 2017 at 1:48 pm

Very interesting column, The sad part is, according to investopedia, to be in the top ten percent earners, you need to make more than $130K, averaging approx. $300K/yr, and they’ve only accumulated 1 Million in the market ?

Cliff Wednesday, November 15, 2017 at 5:50 pm

I put 10% of my salary into my 401k even though i really cant afford to but it is the only way i will ever be able to even entertain the idea of living a semi retired existence when i am older….
i am one of the 1 in 5 households but im trying to get there but its not easy living check to check…

Keep fighting the good fight i tell myself as its for the best

Jonah Thursday, November 16, 2017 at 1:20 pm

I repeatedly hear that people don’t have the money to invest in stocks, or any other types of funds (ETF’s, Mutual Funds, etc.). Interestingly, many of these same people have the latest iPhone, video games, Netflix subscriptions, and on and on. It’s not that they don’t have the money – it’s that they choose to spend it on other things. When I first began working, making very little money, I was paying on 3 college loans, a car and rent. I still found a way to invest what I could. Not that I knew much at the time, but I read and learned, mostly on my own, and it has paid off quite nicely over the years. It can be done.

Brandon Thursday, November 16, 2017 at 5:52 pm

In many cases people aren’t saving because they have no money to save; they’re at best breaking even each month. Other people could save if they gave up some of the things they spend money on and for those people, yes they should save. But for the ones who are already scrimping wherever they can and working full time, the 401k isn’t doing them any good because they have no money to put in it.

Sonny Thursday, November 16, 2017 at 10:19 pm

So where would one put their very small nest egg of 5k ? I have never re-entered the markets since 2008 when I lost all in the metals markets

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