Why people are missing the stock market boom

Despite the Dow's historic rise, many potential investors remain on the sidelines, preferring to put their money into real estate and gold.

By The Week Dec 3, 2013 12:40PM
Dice on stock listings © Kate Kunz/CorbisThe stock market has been on a major tear for the last four years, with both the Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) climbing to all-time highs.

But the gains aren't trickling down to the majority of Americans. Stocks are owned by a record-low percentage of Americans today. Gallup has suggested that low rates of stock ownership are related to high unemployment levels.

Obviously, unemployment is still a massive problem. But I think the shift away from stocks has been as much about the changing preferences of investors as it has been about sluggish growth in the labor market.

Historically speaking, stock indexes have been by far the best-performing asset class, easily outperforming bonds, cash, gold, and real estate. As Warren Buffett has argued, this makes sense in the long run, since stocks are shares in companies that produce a return. In other words, they are a productive asset.

But the last 15 years have been an extremely turbulent period. After the technology bubble at the turn of the century, real estate became the most popular investment in the mid-2000s. But unlike stocks, real estate is not a productive asset. It’s a deteriorating asset that requires spending for upkeep, and when prices rise, more supply is usually built. This makes real estate vulnerable to severe price corrections as occurred in 2008, which clear out the speculators.

After the real estate boom and bust, people began to look around for other investment options. In a 2011 poll, Gallup found that the most popular investment had become gold. But gold isn’t a productive asset either. And the gold boom didn’t work out very well, with gold prices currently down over 30 percent from their 2011 highs.

Sooner or later, more Americans will rediscover stocks. But it's a shame -- given the high current levels of inequality -- that more people haven't been able to benefit from the price rises of the last four years.

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194Comments
Dec 3, 2013 2:29PM
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Saving money is never easy but something you have to do. How many of the people complaining they can't save any money pay a $250 cell phone bill every month and a $200 cable bill? I was in a store the other day and the salesman was explaining a finance plan to a young woman for a cell phone. The world has gone nuts. If you can't afford to buy the phone you obviously can't afford the monthly plan. People need to learn to separate what they really need from what they want.
Dec 3, 2013 1:43PM
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" preferring to put their money into real estate and gold." ..... LMAO - More like groceries and gasoline.

Dec 3, 2013 1:34PM
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People don't trust banks, governments, politicians or stocks.  They all screwed the public and taxpayers.  The Fed has eroded the deposits and savings by printing $12 trillion in bogus currencies that have lifted equities and some commodities.  That hasn't done much for average people who lost their jobs and home values.  The Monopoly game continues.
Dec 3, 2013 1:47PM
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What is the surprise that there are fewer people in the market. The middle class is shrinking. QE has done nothing for anyone but the rich.
Dec 3, 2013 2:00PM
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I will gladly miss out on this pull back before re-investing.

 

If MSN says it's time to buy --

 

You better sell fast...

Dec 3, 2013 2:48PM
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Why buy now when prices are high?  If you are not in now, wait until the market goes into another recession.
Dec 3, 2013 1:58PM
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The middle class is done with the shark swimming & will for some time.

Dec 3, 2013 1:51PM
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Folks should never become complacent to market actions.  I remember Obama saying  business owners didn't actually create anything on their own.  Something about this massive money printing and bond purchasing gives me cause for alarm.  Now from the same philisophical reference folks didn't really make profits through investing wisely they made money because of FED money managing.  There is an eventual surprise somewhere in this maze of BS for market participants.  I would not trust much of anything with this Banking/Guberment secret relationship we see today. This gray area and the too big too jail mentality leaves a whole lot of risky unknowns in my opinion.  You never make a profit until you sell and we need to make that rule numero uno.
Dec 3, 2013 1:25PM
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People don't understand the difference between volatility and risk.  Stock market price swings are not a risk if you own a diversified portfolio, buy regularly and hold on during market declines.  These swings (volatility) happen on a very  regular basis.  On average we have a 10%+ decline once per year, a 15%+ decline once every two years and a 20%+ decline every three years.  The real risk is not earning the long-term returns of stocks and running out of money in retirement.  The Dow and S&P 500 are at all time highs - by definition that means that every previous decline has been temporary, while the long-term gains have been permanent.  
Dec 3, 2013 2:01PM
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"Missing" ............. I think the story should have said "Missed". Oh, I forget they want dumb money to take them off their positions.
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"But the last 15 years have been an extremely turbulent period"

 

The tech bubble, housing bubble, slight *&^%%$$# recession etc.

 

Most inexperienced investors want the fast, shiny rewards with no risk. Invest ten bucks and be a millionare by the of of the week.

 

I've sold underperformers as part of a plan during this period but never pulled my money out of the market.

 

 

Dec 3, 2013 2:53PM
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So long as interest rates remain low, and the federal government continues to print paper money, the stock market will give the appearance of "all is well." It's intended to last out Barrack's tenure.

 

But all is not well. And you are being led a merry dance around Wall Street. All to prop up your phony and his cronies in D.C.

 

The Kool-Aid crash: Keep drinking. There is poison in this brew. Albeit, slow poison, the result shall be the same. Arsenic kills, be it a large dose, or many smaller doses.

Dec 3, 2013 2:27PM
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Strange how price go up on something people aren't buying. You want me to invest in a product that doesn't meet the laws of supply and demand. Nope, not gonna do it.
Dec 3, 2013 2:23PM
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Market down 77 yesterday and 115 today.. who is missing out? Go back to the CDO's and mortgage crisis caused by Dodd and Frank forcing banks to loan to deadbeats.. stocks dropping and taking 5 years to recover.. what do people live on until the stocks rebound? We are all not leeches  living off the gov't or are in congess and the white house giving out raises like Reed did and ditto for their gold health care while others pay for their policies.
Dec 3, 2013 3:11PM
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What in the heII do you expect it to do with the Obama administration pumping over $22,000,000,000 (that's billions folks) a week into the economy just to keep it from collapsing? It will end one day and it all will come tumbling down.
Dec 3, 2013 2:38PM
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I took all of my money completely out of the stock market after I lost about 45 grand during the collapse. Now I have everything in real estate. Investments, properties and rentals. At least I can control my real estate investments. I've got lots of rentals that do Outstanding!! I actually see my returns and can buy more property. Is it right? For me it is.!!!! I get to control everything. 
Dec 3, 2013 3:11PM
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Whenever mainstream media attempts to convey a market investment message to the masses beware - with the message herein a market SHORT signal - everyone can't be right, very few are, hence whenever the cattle seems to be heading in the direction of their media herder the direction is typically leading them to the butcher
Dec 3, 2013 2:27PM
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The Market is still in the Red Zone. How can anyone profit from the Red besides the manipulations and corruptions.
Dec 3, 2013 3:02PM
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HELLO!!!  Does the word "tangible" fit in here anywhere?  Does the phrase, "a bird in the hand is worth two in the bush"?  There are certainly those who love the excitement of watching the value of stocks rise and fall.  Its kinda like sticking dollars in a slot machine and hoping you'll hit the jackpot.  There are those who want to make money "quick and easy".  Well, I'll tell you what, ";quick and easy" is like Obama telling the country that Obamacare is a "quick and easy", sure thing.  I prefer, like another writer said, "groceries on the table and gasoline in the tank".  That's "tangible".  I can raise a garden on "real estate".  I can buy provisions with "gold".  Let's see how many groceries/gallons of gasoline you can buy with a stock certificate.  If big bucks is your dream/goal, then by all means, play the stock market.  I prefer to be a little more self-sufficient.  I like having more intimate control over my assets.  I don't need a broker to buy or sell my real estate - or gold for that matter.  Let's see you build a house on stocks.  Let's see you feed a family on stocks.  Let's see you drive to work on stocks (Oh, that's right, you're rich from stocks, you don't have to work!)  Folks, all this hype we are seeing in the media is to get people to invest and drive the market higher so speculators can sell-off and make more money to buy more stock.  Good luck!!!
Dec 3, 2013 1:46PM
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Now is the time to be getting out of stocks. What more proof do we need then today?
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