Table 5
Stock Ownership by Age Bracket, 19891995
Families Owning Stock (%)
Age of
Head of Family (years)
1989
1995
Increase
<35
22
37
65
35 to 44
39
46
19
45 to 54
42
49
17
55 to 64
36
40
11
65 to 74
27
34
28
75 plus
26
28
7
Source: Board of Governers of the Federal Reserve System, Federal Reserve Bulletin , January 1997,
and unpublished revisions.
The absolute
cent, roughly triple the rate of their white
for another or moved money between them, 32
numbers of
coworkers. In a January 1999 survey by
percent automatically purchased shares in a
Rasmussen Research, 21.25 percent of black
fund from a bank account or paycheck, and 16
investors
respondents owned "more than $5,000 of
percent chose to reinvest dividends.
increased across
stocks, bonds or mutual funds"--roughly
every educational
Expanded Choice
half the rate for whites.
"The 401(k) asset-allocation choice,"
grouping between
wrote James Poterba and David Wise,
1989 and 1995
The Convergence of Wall
"reflects two decisions: one by the employers
Street and Main Street
with regard to which investment options to
offer, and a second by employees with respect
to which investments to choose, given the
How involved were the new stockholders
available menu. Broad choice is now the rule,
in capital markets? Were they active man-
rather than the exception. . . ."3 4
agers or passive participants? The available
evidence suggests that during the 1990s both
IRS regulations require 401(k) plan
investor activity and investor awareness
providers to offer workers a range of invest-
increased--that Wall Street and Main Street
ment choices. In 1990, the average number of
are indeed converging.
choices available to 401(k) participants was
3.2. By 1993, the average had increased to 5,
and the median was 4.3 5 The PSCA reports
Increased Account Activity
Americans added mutual funds to their
that the number of 401(k) plans offering five
portfolios at an amazing pace and are actively
or more funds increased from 77.7 percent in
managing them. In 1989, half the investors in
1996 to 87.7 percent in 1997; whereas the
mutual funds held only one. Only 6.9 percent
number offering 10 or more increased from
owned five funds or more. By 1995, a quarter of
16.2 percent in 1996 to 30.6 percent in 1997.
mutual fund investors held one fund, and 24.1
That year, the average number of plan invest-
percent owned five or more. (See Table 8.)
ment alternatives climbed to eight.
In 1996, ICI reported the level and variety of
Table 9 shows the results of a 1994 study
account activity among mutual shareholders
that provides a mid-decade snapshot of the
over the past 12 months: 22 percent purchased
types of options employers were offering
a mutual fund, 46 percent added money to a
through 401(k)s and the degree to which
fund, 25 percent exchanged one mutual fund
employees were exercising them.
12