As with my financial planning questions, my answer to the question: “Do I Own Enough Stock” will be predictable, and probably irritating, but . . . it depends. The correct amount of stocks that a family should own is very much linked to their goals. And the calculation of “how much” can be tricky. Do you count the money in your checkbook to pay monthly bills? Do you count the emergency savings account at the bank? Do you count the money stashed in cash in your sock drawer?
So, the best way to truly understand if you need to own more or less stock is to understand your entire financial picture. Yes, I help families do that. Yes, I would be honored to help you do that. If you would like to talk about how I do that and how it would work for your family, follow this LINK to find a time for us to talk.
Regular readers know that I am always an advocate for my clients – a fiduciary financial planner. So, I’m always happy to meet new people and I’m honored when I can be of service.
Understanding Stock Ownership in Relation to Financial Planning
For perspective, an April Gallup survey finds 58% of Americans reporting that they own stock, based on its Economy and Personal Finance survey. This is slightly higher than the 56% measured in 2021 and 55% measured in 2020 but is not a statistically meaningful increase.
Gallup's measure of consumer stock ownership is based on a question asking respondents about any individual stocks they may own, as well as stocks included in a mutual fund or retirement savings account, like a 401(k) or IRA.
The survey shows that owning stocks is often related to who you are. Stock ownership is strongly correlated with household income, formal education, age, and race.
- In this survey, the highest stock ownership was 89% for adults in households earning $100,000 or more.
- Those with post-graduate education showed 79% ownership.
- And households earning less than $40,000 a year reported 25% stock ownership.
Source: The Gallup Organization.
Please note, that these figures talk about HOW MANY households own stock, not HOW MUCH stock they own.
Factors Influencing Stock Ownership: Insights and Recommendations
Based on my 20-plus years as a financial professional, and loads of academic research, I can tell you a few things are probably true for you.
- Most likely you DON’T own enough stock.
- Firstly, most of us don’t save enough. Generally, the thumb rule is to save about 20% of your gross earnings each year toward retirement. That’s BEFORE you save for vacation, before you save to send junior to college and before you save for a new car.
- Secondly, most people don’t put enough of their “savings” into stocks. For most working folks who are 10 years or more from retirement, their retirement money should be almost ALL STOCK. This will generally provide growth faster than inflation over the 10-year period and help you get ahead of their retirement goals.
- And, I bet that you ALSO don’t have enough CASH SAVINGS. My general recommendation is cash in saving at the bank as insurance against unexpected expenses. I encourage saving the equivalent of 6 months of basic monthly spending in the emergency fund. If you consider your income more volatile than average, then you should increase that number up to about 12 months’ worth of bills.
I hope this information has got you thinking. And, I hope you consider meeting with me or, one of the other experienced, well-trained CERTIFIED FINANCIAL PLANNER™ professionals in your area.
To find a CFP® professional near you, start your search here.
A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.