7 Years After Crisis, Americans Still Spooked Over Stocks

Wall Street
U.S. flags fly over the New York Stock Exchange early Tuesday morning Jan. 22, 2008.
Seven years after the financial crisis (and six years after Warren Buffett declared it to be over), Americans are still leery of getting back into stocks.

That's the upshot of a poll recently released by Gallup, which confirmed that while no longer quite as negative on stocks as they were a couple of years ago, American investors still haven't returned to the levels of stock ownership seen before the crisis -- or even in its immediate aftermath.

Once Burned, Still Shy

In the run-up to the financial crisis, Americans threw care to the wind. Despite having been burned just a few years earlier by the "popping" of the dot-com bubble, Americans at the dawn of the financial crisis were more devoted to stock investing than ever before.

Just before the bubble burst in 2000, 62 percent of Americans owned stocks (either directly, through a mutual fund, or through a 401(k) or IRA plan). Undeterred, investors proceeded to pile right back into the market post-bubble. By the time the financial crisis hit in 2008, stock ownership levels had exceeded pre-bubble levels -- hitting 65 percent.

Fool Me Twice ...

This, however, marked the high-water mark on investors' patience. One year into the financial crisis, stock ownership levels plummeted 8 percentage points to 57 percent -- and kept on falling all the way into 2013, finally bottoming at 52 percent.

Fast-forward another two years and stock ownership in the U.S. has barely lifted itself off that floor. Stock ownership levels stand today at just 55 percent, according to Gallup. This is despite the fact that, since bottoming at 7,033 points in early 2009, the Dow Jones industrial average (^DJI) has risen 156 percent in value over the succeeding six years.

That's a crying shame -- the more so when you notice the statistics that show which Americans have shied farthest away from stocks and have stayed away the longest.

Fool Me Thrice?

As Gallup's data reveal, overall and across the nation, 55 percent of Americans have at least dipped their toes back into the stock market (or never left). The numbers are similar for the subgroups of:
  • Americans earning between $30,000 and $75,000 -- 56 percent
  • Americans ages 55 and older -- 57 percent
  • and those ages 35 to 54 -- 58 percent.
In contrast, investors who refuse to invest in the stock market today congregate within just two groups:
  • Americans ages 18 to 34. Experts point out that young investors have the most time to benefit from a bit of risk taking, and plenty of time to recover from the occasional bad investment. Yet only 49 percent of them are "in the market" today.
  • And poorer Americans earning less than $30,000 annually. This demographic has avoided the stock market in droves: Only 21 percent of the sub-$30,000 set are invested in the market, according to Gallup.
In contrast, Gallup notes just one group that owned stocks before the financial crisis, kept owning stocks all the way through the aftermath, still owns stocks today, and consequently has reaped the lion's share of the gains from the rising stock market: The rich.

According to Gallup, "the financial crisis did not appear to have had much of an effect on whether [the] wealthiest Americans chose to invest in the market." To the contrary, 90 percent of Americans earning $75,000 owned stocks before the financial crisis. Eighty-eight percent of them continue to own stocks today.

Investing for the long term, riding out the short-term turbulence, and patiently awaiting better days, the rich have reaped the rewards of one of the fastest, and biggest, market rebounds in recent memory. Maybe, if we want to get rich one day, too... we should all follow their example when the next "crisis" hits.

Motley Fool contributor Rich Smith wishes he practiced more of what he preaches. In the spirit of full disclosure, he's forced to admit that while he didn't panic and sell after the financial crisis... he didn't do nearly enough new buying, either. Rich does not own shares of any stocks or indexes mentioned above, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days.
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