I Own Stock but I'm No Fat Cat

*Image by Key Wilde via Getty Images.* *Paul Solman answers questions from the NewsHour audience on business and economic news here on his [**Making Sen$e**](http://www.pbs.org/newshour/economy/makingsense/) page. Here is Wednesday's query:* **George White**: Some people would have us believe that owners of shares of stock are "Wall Street fat cats." My wife and I own stock in our IRAs, but we are certainly not fat cats. The gyrations of the stock market, roiled by domestic and international crises, have reduced our retirement nest egg by as much as thirty percent this year. How many others are similarly affected? Is it really "fat cats" who own most of the shares, or is it people like us with defined-contribution retirement accounts, now that defined-benefit pensions are rare? What percentage of stock is held in retirement accounts (IRA, 401(k), pension, annuity, etc.)? Or to come at the question from the other direction, what percentage of retirement accounts contain shares of stock? **Paul Solman**: I don't know the answer to your last set of questions, George. I suspect you can trawl the Internet for answers about as well as I. But here's what I *can* report with respect to owners of stock in America. In 2007, according to the Federal Reserve, of the "bottom" 60 percent of U.S. families -- in terms of income -- about *half* owned stock either directly or indirectly. Those in the top 10 percent of income: *91 percent*. The data are consistent and unsurprising: the richer you are, the more stock you own -- by a lot. I certainly wouldn't call most of those in the top ten percent "fat cats." The income threshold for entering that category, five years ago, was about $120,000. It is worth noting, however, that the top ten percent are much better off the rest. They took home about half of all U.S. income in 2007, and that was a higher share than anytime in nearly a century. (See [**this paper**](http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCsQFjAB&url=http%3A%2F%2Felsa.berkeley.edu%2F~saez%2Fatkinson-piketty-saezJEL10.pdf&ei=QwyPUPnqAsWK0QH61ICACA&usg=AFQjCNEF66c-qH9uds2vYgDvDSzWXN_Fnw), page 6, for documentation.) *Click to view larger version. From "Top Incomes in the Long Run of History." [**Journal of Economic Literature**](http://elsa.berkeley.edu/~saez/atkinson-piketty-saezJEL10.pdf) 2011, 49:1, 3-71.* But here's a more pointed answer to your email. If your nest egg has been reduced by 30 percent this year, and it's invested in stocks, you have absolutely no one to blame but yourselves. Last I looked, the S&P 500 index was *up* -- by more than 16 percent! Your lament reminds me of a chart I show to students. Over the twenty years ending Dec. 31, 2010, the S&P 500 Index averaged a return of 9.14 percent a year, according to Dalbar Inc., a firm that tracks investments. But by trying to pick winners and paying high fees to money managers, the average equity *investor* earned a market return of only 3.83 percent. How about 2011? According to Dalbar, "the average equity fund investor underperformed the S&P 500 by 7.85 percent." Moral of the story: when investing in the stock market, buy and hold in a diversified fund with the lowest possible fees. You may not become a fat cat, but you won't wind up in the alley, griping about accusations of being one. *We at Making Sen$e are working on a story to explain where the monthly unemployment numbers come from. To do so, we are looking for interviewees who have worked on the Current Population Survey (CPS; household survey) and/or the Current Employment Statistics survey (CES; establishment survey). Are you a former surveyor? Do you know one? If so, we want to hear from you! Please email us at [**businessdesk@newshour.org**](mailto:businessdesk@newshour.org). Be sure to include your contact information. Very much obliged.* *This entry is cross-posted on the [**Rundown**](http://www.pbs.org/newshour/rundown/)- NewsHour's blog of news and insight.*

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