Why less than half of Americans are investing in the stock market

Fifty-two percent of Americans don’t have any holdings in the stock market, according to a Bankrate survey released Thursday. Lack of funds is the main reason, but many Americans still say the stock market is ‘too risky.’

Historically, there have been few more reliable or accessible ways to slowly build wealth than investing in stocks. But despite that, a shrinking minority of Americans is actually doing so.

Fifty-two percent of US adults don’t have any money invested in the stock market, according to a survey released Thursday by Bankrate.com, a personal finance site.  The most commonly cited reason was lack of funds to invest – over half of respondents (53 percent) said they simply couldn’t afford it. Other common reasons included a lack of knowledge about stocks (cited by 21 percent of people), mistrust of brokers and financial advisers (9 percent) and the stock market being “too risky” (7 percent).

Despite high levels of student debt and relatively low earnings, Millennials were the least likely age group to say they weren’t investing because they didn’t have enough money – 42 percent cited that as their main reason. Respondents aged 65 and older were the most likely.

The study lines up with other statistics showing a decline in stock market participation over the past decade and a half. Stock ownership peaked in 2002, when 67 percent of Americans owned stocks, according to the Gallup polling organization. By 2013, by their estimates, the number had fallen to 52 percent.

Young adults aged 18-29 are the least likely age group to own stocks, according to Gallup, and their numbers are falling as well. Just over a quarter of that group owned stock in 2013 – down from 33 percent in 2008, thanks in part to a lingering mistrust of the equity markets and the financial industry at large in the wake of the 2008 crash. 

Indeed, the crash scared off investors of all ages, and those who have been on the sidelines for the last six years have missed out on one of the longest uninterrupted bull runs since the Great Recession. The current bull market celebrated six years without a correction of 20 percent or more in early March.  

Wealthy investors, meanwhile, have profited considerably from the recovery in stocks, which outpaced all other aspects of the economy. According to a 2010 study from the Pew Research Center, the wealthiest 10 percent of Americans control an estimated 80 percent of stocks and mutual funds.

The gap, however, has more to do with the holdings of the wealthy versus the rest of America, rather than the stock market itself having a high financial barrier to entry. Rich Americans tend to have a larger proportion of their wealth tied up in equities than the middle class, whereas middle class and lower class Americans hold most of their wealth in their homes.

“Stocks aren’t only for the rich; even if you start small, investing in stocks through mutual funds or ETFs can help you build wealth over the long term,” Claes Bell, a CFA and Bankrate.com analyst, said in the study’s release  “The key is to have an investment plan in place that aligns your investments with your risk tolerance and goals.”

Bankrate conducted the study with the Princeton Survey Research Associates International (PRSAI), by surveying 1,001 US adults over the phone.