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  Chapter Fourteen:
 
BUSINESS
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  Gross Domestic Product
  Business Cycles
  Business Revenues
  Trading Volume
  Dow Jones Average
  Stockholders
  Crude Oil
  Energy Consumption
  Patents
  Imports and Exports
  Foreign Investment

  

 

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BUSINESS

Stockholders

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For much of the century, only a small fraction of the population owned stock, but from 1980 to 1998, the proportion of stockholders grew rapidly.
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In 1998, 52 percent of Americans owned shares in public companies or equity mutual funds, either directly in their own accounts, or indirectly in retirement and trust accounts. This percentage was four times higher than in 1980, when only 13 percent of Americans owned stock. By the end of the century, more than half the population were capitalists in some sense. 

Many factors contributed to the broadening of stock ownership. New pension laws shifted many employees’ pensions to the new 401(k) plans, most of which are invested in stocks. Mutual funds made it easier and cheaper to start investing. Federal law deregulated brokerage commissions. On-line investing facilitated stock purchases by reducing both paperwork and commissions. Finally, after almost twenty years of unprecedented prosperity, many Americans had significant wealth with which to invest in equities. 

Historically, according to Jeremy Siegel of the University of Pennsylvania, investments in equities have grown by 7 percent per year, after inflation. When compounded, such investments double in value every decade. At 7 percent compound interest, a twenty-two-year-old employee investing $2,000 a year with matching funds from his or her employer, would have $1.5 million at age seventy.


Chapter 14 chart 6

Source Notes
Source Abbreviations

SA 1953, table 592; SA 1959, table 594; SA 1970, tables 2 and 684; SA 1988, tables 2 and 592; SA 1998, table 842; and Louis Hacker, The United States: A Graphic History (New York: Modern Age Books, 1937), page 170. See also Lewis Kimmel, Share Ownership in the U.S. (Washington, D.C.: Brookings Institution, 1952), and Robert J. Lampman’s review of Trends in the Distribution of Stock Ownership by Edwin Burk Cox, Journal of the American Statistical Association (June 1964):606–607. For the average, long-term return on equities, see Jeremy J. Siegel, Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies, 2d ed. (New York: McGraw-Hill, 1998).

 

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