Wall Street, meet Main Street

The profile of the average stock market investor has undergone a transformation over the past three decades, with the number of U.S. households holding stocks skyrocketing. Fiftytwo percent of American households owned stocks at the end of 2016, compared with 32 percent in 1989, according to the most recent Survey of Consumer Finances by the Federal Reserve Board.

The Fed reports that 65.4 million households owned stocks in 2016, either as direct investments or through mutual funds and other vehicles. Much of that growth came about through the growth of IRAs and 401(k) plans.

The numbers alone are not that surprising, given the growing importance of defined-contribution retirement plans as most companies stopped offering defined-benefit pension plans. The surprising part is that growth in stock ownership has occurred on every income level, and the most rapid growth has occurred among lower-income Americans.

According to a newly released analysis of the Fed data conducted by the Investment Company Institute, nearly four out of 10 households that own some stocks have annual income lower than $68,000.

Here are the numbers, according to ICI:

1 Lowest income quintile – 11 percent in 2016 vs. 4 percent in 1989 own stocks.

1 Second-lowest quintile – 32 percent in 2016 vs. 15 percent in 1989 own stocks. 1 Middle income quintile – 50 percent in 2016 vs. 30 percent in 1989.

Among all households owning stock, 37 percent have annual income below $68,000 and 29 percent have annual income between $68,000 and $111,000. That’s a total of 66 percent, for a picture that is not in sync with stereotypes about the super-wealthy owning most stock shares.

These numbers show that the transition to selfdirected, defined-contribution retirement plans has placed the power of equity earnings into the hands of a wider spectrum of U.S. families. Of course, families with a very high net worth often own stock worth many times more than the holdings of an average family’s 401(k) plan, but that doesn’t take away from the fact that more lower-income and middle-income families now have a stake in the markets than ever before.

The Fed data shows that 55 million Americans had 401(k) plans in 2016 and 58 million had invested in IRAs. Many of these accounts are heavily weighted toward stocks, rather than for instance bonds, because many households are counting on the growth levels historically provided by stocks.

Growing participation in the stock market is a good thing, because stocks have delivered the highest average returns over the long term when compared with investments such as bonds, precious metals and other alternatives. dependable, long-term returns have become more important in recent decades as longer lifespans result in longer retirement periods.

For those who remain nervous about investing in the stock market, a good place to start is to learn about markets, investment portfolios and financial planning basics. Then talk to a financial planner about your retirement goals.

Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.