Table 1
Stock Portfolios by Value, 19891995
Size of
1989
1995
Portfolio
% Change in
(thosands
No. of owners
% of total
No. of owners
% of total
no. of owners
of dollars)
(in millions)
shareholders
(in millions)
shareholders
1989-1995
<5,000
20
39
18
27
-10
5-10
8
15
9
13
14
10-25
10
19
14
20
35
25-50
5
10
10
14
95
50-100
4
8
7
11
76
100,000+
5
9
11
16
140
Total:
52
100
70
100
Source: James M. Poterba, "Shareownership 1998," New York Stock Exchange, 1998, and calculations by the
author.
lion in 1984 to $1.5 trillion in 1997 ($1.05
assets--became the investment of choice in
trillion of it in equities).2 0 According to the
the 1980s and 1990s.
PSCA, companies offering 401(k)s more than
Earlier booms in employee shareholding
tripled during the 1990s.21 The ranks of
had been based on workers' ownership of a
active plan participants swelled from 17.3
specific stock, often their employer's. Those
million in 1989 to 34.0 million in 1998.22
booms collapsed when depressions wiped out
In 1995, Poterba, Venti, and Wise stud-
particular companies. Through mutual fund
ied how 401(k)s affected overall savings.
investment, however, workers pooled risk.
They discovered "little evidence that 401(k)
Their participation in capital markets reflect-
contributions substitute for other forms of
ed the overall performance of the economy, or
personal saving, including IRA contribu-
at least of broad sectors thereof. From the first
tions."2 3 Comparing workers eligible to par-
dollar, the worker-investor could own a diver-
sified, professionally managed portfolio. Fifty-
ticipate in 401(k)s with demographically
four percent of investors in the 1997 Nasdaq
similar but ineligible workers, they found
survey preferred mutual funds to individual
that over a seven-year period, the former
stocks, agreeing: "There is less risk, because
accumulated financial assets at more than
funds invest in many different companies."
double the rate of the latter. The effect held,
The growth of this industry can be traced
with slight variation, at all income levels.
through the proliferation of funds, the num
-
(See Table 2.)
ber of shareholder accounts, and total mutu-
But financial savings did not "crowd out"
al fund assets. (See Table 3.)
other savings. The 401(k) savers accumulated
The mutual-fund holdings of private pen-
nonfinancial assets--cars, homes, real estate--
sion plans grew from $29.2 billion in 1990 to
at the same rate as their nonplan peers. The
$457.0 billion in 1997. About half of mutual-
increase in net worth was genuine.
fund assets were equities.
Mutual Funds
Employee Ownership Plans
Mutual funds--shares in a managed port-
Early theoreticians of worker capitalism
folio of stocks, bonds, or other financial
8