During the first two years of the economic recovery, the mean net worth of the wealthiest 7% of Americans rose by about 28%, while the other 93% saw 4% of their wealth vanish, a report released April 23 by the Pew Research Center says.
Why? In a word: stocks. The rich have more money invested in the market.
“From 2009 to 2011, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896,” Pew says, citing 2011 Census Bureau data.
This significant income gap, Pew explains, is because the stock and bond market rallied during the 2009 to 2011 period while housing remained pancake flat:
“Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home.”
Those figures, of course, are from before the stock market began to roar this year, meaning the rich can now really scrub behind their ears with Dom Perignon.
Pew points out that during the study period, the S&P 500 jumped by 34% (and since has notched up an additional 26%), while the S&P/Case-Shiller home price index slid by 5%. Even with a rebound, home prices are still 29% below their 2006 peak.
“Among households with net worth of $500,000 or more, 65% of their wealth comes from financial holdings, such as stocks, bonds and 401(k) accounts, and 17% comes from their home,” Pew says. “Among households with net worth of less than $500,000, just 33% of their wealth comes from financial assets and 50% comes from their home.”
Moral of story? Get yourself some of that stuff. Not the Dom Perignon. Those wealthmaking stocks.
BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.