the collective value of All American publicly traded stocks is now over $ 58 trillion that's more than a three times increase from just a decade ago and American public stocks are now the second largest asset class in the World Behind only Chinese real estate these amazing returns coupled with new technology which makes getting into the market easier than ever before has meant that more Americans than ever are stock owners benefiting from this strong Market investing is the best tool for average people to build up wealth to fund some of the most important life goals like
retirement sending their kids to college or leaving some money behind for their children with more people than ever benefiting from the stock market it means what is good for investors is good for everybody the only problem is basically everything I have just said is complete [ __ ] you are not an investor but it's really important that you think you are so as we talked about record for the S&P record for the NASDAQ it's a big list some big some big numbers in terms of number of of layoffs it's always negative and not to not
to make of anything that people are going through because it's very hard but often we see companies bounce up okay so the rate of stock ownership is approaching all-time Highs but those Highs are probably lower than you expect according to a Gallup survey just 61% of households own any stock at all either directly or through a mutual trust this data is roughly in line with the FED estimates which suggest that we have now surpassed the previous peak of household stock ownership that was reached just before the market crash of 2008 more people owning more stocks
is great but the problem is that these record levels have only been hit for two reasons the first reason is that most of these stocks are held in 401K accounts which would become far more common as old-fashioned employee pension plans slowly go extinct this is putting the market risk in retirement onto workers but overall a diversified portfolio should be safer than an employee pension scheme which have been completely evaporated in dozens of high-profile corporate bankruptcies in past decades this is not really a sign of households owning more stocks though because in the past employer pension
schemes would invest their employees pension accounts into the market to help fund the liability so the only thing that's really changed is What entity is holding on to the shares the second reason that more people own shares now is because it's become easier thanks to low-cost or zero commission brokerages like Robin Hood now that isn't necessarily a good thing investing should be a part of a sound financial plan but it will not make you rich by itself according to Robin Hood's most recent filing its average funded account had less than $5,000 invested in to total
another report published by the finance firm stilt found that almost 43% of Robin Hood users had FICO scores below 650 a survey conducted by The Wall Street Journal found that debt relief was one of the primary motivators for using the investing app now I don't want to crush anybody's dreams here but the chance of being able to generate investment returns greater than the interest payments on high-risk consumer credit is effectively zero in the long-term there are people who get lucky but the vast majority of these investors would be much better taking the money they are
putting into Robin Hood and using it to pay down their High interest debt if you do happen to have a consistent strategy for generating returns above the interest rate of a low credit score car loan then you don't have to worry about those anyway because Citadel or Jan Street would probably offer you a seven fig signing bonus clearly a lot of these users are not being realistic about generating consistent investment returns they're gambling it's probably no coincidence that the fall inactive users for Robin Hood lines up almost perfectly with the rise in active users for
sports gambling apps like DraftKings FanDuel and the various Casino offerings a report by Bloomberg found that these investors were taking their money out of stocks to top up their accounts on these platforms and really they have about the same chance of hitting a five leg parlay as they do making money on a zero data expiry out of the money call option on orange juice Futures so the number of people owning shares for the first time is misleading at best and outright dangerous at worst but you are probably better than that right you might have a
Buy and Hold portfolio that you make regular contributions to you don't have any high interest debt and you might even watch low energy Boomers like Ben Felix or the plan Bagel that give realistic guidance on how to invest your money surely you are an investor right wrong statistically speaking the only difference between you the average person watching this video and someone blowing up their Robin Hood account is at least those guys have a little bit of self-awareness so it's time to learn how Money Works to find out why you are not not an investor but
it's very important that you think you are this week's video is brought to you by brilliant brilliant is an Interactive Learning platform that helps you truly understand concepts by engaging with them directly whether it's math programming or data analysis brilliant offers thousands of lessons designed to make complex topics and more enjoyable to learn I've recently started using their daily learning challenges and I love how quickly I've been able to sharpen my problem solving skills in just a few minutes each day it's a great way to keep your brain active without feeling overwhelmed what's great about
brilliant is you can access it on your phone tablet or computer so it's perfect for fitting learning into a busy schedule try everything brilliant has to offer for free for 30 days by visiting brilliant.org how money works and if you like it you'll also get 20% off an annual premium subscription this video was actually inspired by a comment on our video about Farmland becoming the target of major investment firms I don't want to call that particular comment are out but they said something like even if investors do buy up all the Farmland it doesn't matter
because we are the investors through our pensions retirement savings accounts or direct Holdings this line of thinking has been used to protect investors in the past with big bailouts because if markets are allowed to suffer then people will lose their life savings the reality is that stock ownership in America is incredibly concentrated in the hands of very wealthy people according to a Fed survey of consumer finances the top 10% of Americans own 93% of all stocks so everybody worth less than $1.6 million is really just fighting over the scraps even within the top 10% stock
ownership is still incredibly concentrated with the top .1% increasing their Holdings faster than any other group these people are investors as a majority of their earnings power will be derived from dividends and capital appreciation from their shareholdings the detail is that very few of them got there by investing alone most of the wealth in the very highest percentiles of wealth was made through a combination of investing and either running a successful business having a career as an extremely well-paid executive or just inheriting their Investments there is a similar misconception that millionaires get rich by building
an average of seven different sources of income just like the idea of being an investor can make you rich this is based on an element of truth it's based on an IRS report that studied households between 1998 and 2002 and it found that high net worth respondents had reportable tax income from dividend income from stocks owned earned income from pay checks rents from rental real estate royalties from selling rights to use something they've written or invented capital gains from selling appreciated asset assets profits from business they own and interest from savings CD bonds or other
lending activities the thing is at least four out of those required the household to have money invested in the first place so they didn't really get rich from having multiple sources of income they had multiple sources of income because they were Rich so what this means is that for the vast majority of even the most diligent investors it's better for them to focus on increasing their earnings to buy more Investments than it is to focus on hyper optimizing their investments in the best case scenario if you have got yourself a good job made responsible financial
decisions and are consistently putting money away into an Investment Portfolio not only are you in the top five% of people but you are still a worker that happens to have some Investments now there are actually three reasons why it's really important for you to think otherwise the first reason is that people that think more about their Investments tend to make worse Investments a study by UC Berkeley found that stock portfolios held by female investors generated annual returns of 1% higher than their male peers on average 1% might not sound like a lot but compounded over
a multi-decade investing Horizon and that small difference could easily double or triple a portfolio size for single men and single women the difference was even wider at 1.44% what was the cause of these higher returns women just cared less about investing so they didn't try to fine-tune their portfolio as much as men did there is an entire industry of market makers and prop trading firms that can only make money when there is dumb money active in the market so there was a multi-billion dollar industry that really need needs you to trade your Investments as much
as possible so they can pick up a few cents every time you do the second reason is that if people think they are investors they are a lot more receptive to Pro investment policy either from their governments or their companies bailouts loosen investment regulations lighter work protections and business subsidies overwhelmingly benefit investors often at the expense of workers other questionable practices like corporate investment into single family homes leveraged buyouts anti-competitive practices and Market consolidation are surprisingly hard to push back back against because lobbyists immediately bring up the fact that restricting these practices would hurt people's
retirement savings if these businesses couldn't do what they do if people think they are investors it's a lot easier to get support for these policies the third reason is that people who think they are investors are better consumers a survey of 2070 respondents conducted by the market research firm ticker found that consumers were 80% more likely to purchase from a company that they own shares in apple shareholders were more likely to buy an iPhone Amazon shareholders were more likely to be prime customers and Tesla shareholders were much more likely to drive a Tesla it's highly
unlikely that the investment returns from these companies will cover the purchases unless you made a significant investment when these businesses were much smaller than they are today if you buy a few Tesla shares because you believe in the vision of electric self-driving cars and you also pick up a model 3 then you are a consumer that just so happens to also own some shares not an investor companies know about this trick and some of them even offer special deals to shareholders in the business the Carnival Cruise Line Corporation for example offers shareholders discounts on trips
if they own at least 100 shares on the company which amounts to about $1,800 as of the date of making this video they don't offer these deals because they think a few retail investors will bolster their stock price they do it because it's effectively a loyalty program that people tie up hundreds of dollars to join now the most important piece of nuance amongst all of this is that investing is still incredibly important go watch my latest video on the millions of people who can't afford to retire but are being being forced to anyway to find
out why and as always if you want to get these videos a daily and read some harder-hitting articles that just wouldn't do well here on YouTube sign up to my completely free email newsletter to keep on learning how money works
