11 Investing Statistics & Facts You Should Be Aware of in 2023
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People who have a lot of money make even more money. Why is that? It’s because they invest their money and diversify investments. Over the years, investing has been worthwhile, especially if you start early.
But how likely is it to become a millionaire investing, and how much is needed to archive your investment goals?
Below you find the 10 most interesting statistics and facts about investing.
Top 11 Investing Facts and Statistics
- $681.31 annual investing makes you a millionaire at the age of 65
- 61% of Americans own stock
- 62% of U.S. adults handle online trading activities through a website
- 64% of millennials prioritize investing for retirement instead of paying down debt
- 42.9% of AAII members are still feeling bullish about the stock market
- Over 50% of investors do not fully understand what they invest in
- 68% of Investors see responsible investing as a strategy to be used to mitigate market risk in their portfolio
- 65% of Financial Planners recommend Exchange-Traded funds to their clients
- Young Investors are willing to lose up to 10% of retirement savings to support ESG causes
- 82% Of Investors say that financial performance is the most common input for making investment decisions
- 20% of Americans Household earn $4,200 passive income per year
$681.31 annual investing makes you a millionaire at the age of 65
Investing in the stock market pays out massively when you start early. The average market return of the S&P500 between 2013 and 2021 was +11.56%. This does not sound much, but it is a game changer when you want to become a millionaire.
It only needs $681.31 in annual investments to become a millionaire at the age of 65 if you start contributing at the age of 20. The power of compounding and dollar-cost averaging makes it possible.
We have calculated an annual investment at the beginning of each year, used the average S&P 500 as a performance benchmark and compared three different starting points for investing.
Annual investments: $681.31
- Starting Age: 20 | Amount at the age of 65: $1,000,009
- Starting Age: 25 | Amount at the age of 65: $576,018
- Starting Age: 35 | Amount at the age of 65: $188,587
As you can see, it makes a fundamental difference if you start investing early. You outperform people who start with 35 with a factor of 5.3 if you start with 20. $681.31 is $56.77 per month and, therefore, a reasonable amount everyone should be able to invest at the age of 20.
Yet, the years needed to become an investing millionaire differentiate massively depending on the average stock market performance. It takes 45 years if you invest $681.31 yearly to become a millionaire at the age of 65 with an average stock market return of 11.56%. Still, it takes only 38 years if the stock market performs with +35% annualized and 88 years if the stock market return goes down to an average of 5%.
What average outcome can you expect? While there is no guarantee for future results, we can look back and check how much investments paid out. Here are some interesting stock market performance statistics of the S&P 500 (annualized average returns):
- Last 50 years: 8.69%
- Last 25 years: 7.28%
- Since the turn of the millennium: 5.90%
- Between 1928 and 1952: 4.7%
- Last 5 years: 9.27%
- Last 10 years: 11.56%
Independently from the final outcome of investing in the stock market, the benefit of starting investing early always remains. The earlier you start, the more money you have at 65.
61% of Americans own stock
Based on a recent poll by Gallup, 61% of interviewed Americans report that they own stock, which includes holdings in retirement savings accounts and mutual funds. A strong correlation between formal education and household income was identified, where 84% of households with earnings of $100k own stock, while only 29% of households with earnings of less than $40k own stock. Another interesting factor is that 74% of married people hold stock, while only 48% of not married people do.
62% of U.S. adults handle online trading activities through a website
An investor survey by FINRA (taken between 7/2021 and 12/2021) reveals that the majority of investors in the U.S. still place their trades the traditional way by using the online broker website. In addition, about 44% use mobile apps. The younger the investors, the more mobile apps are used.
The same survey revealed that investor knowledge is at a relatively low level. Only 4.7 out of 10 questions of their investor knowledge quiz were answered correctly, where only a third understood the primary advantage of an index fund/ETF compared to an actively managed fund. Therefore, most investors are unaware that they can save a lot of money by investing in ETFs due to generally lower expenses and fees related to ETF investing compared to investing in actively managed funds.
64% of millennials prioritize investing for retirement instead of paying down debt
Investopedia asked 1,405 millennials during their Affluent Millenial Investing Survey about their investing habits and the impact of education on their way to investing, saving and spending money. Interestingly, about 50% of people said they expect to be forced to work beyond retirement age, which might be why 64% invest for retirement and prioritize those investments over paying down debt.
37% of interviewed millennials feel knowledgeable, and those who feel knowledgeable are 5 times more likely to feel confident about their financial decisions. And those who feel confident about their financial decisions say they are highly engaged in their personal finances.
Therefore, becoming knowledgeable about finance is the key to long-term investment success.
42.9% of AAII members are still feeling bullish about the stock market
The American Association of Individual Investors members can vote about their expected market direction on how they feel the stock market will be in the next 6 months. The sentiment indicates that 42.9% of investors are still bullish, while 27.8% are bearish, and 29.4% are neutral.
In 2023, the survey reached the worst bullish sentiment with the reporting date of March 15, when only 19.2% of people were bullish.
The interesting thing is that at this point, the S&P was near its annual lows and started a rally from there, going up from the March lows at $380.65 to over 440.0 in June 2023.
It is an old saying that you must invest when most people are afraid to invest, and bearish sentiment is high. And this was again true. Those brave enough to invest when the majority was bearish got rewarded big time.
Over 50% of investors do not fully understand what they invest in
The Ariel-Schwab Black Investor Survey 2022 reveals that 47% of black and 45% of white investors do not fully understand what they invest in. While there is only a minor difference between black and white investors, the fact that over 50% of asked people don’t fully understand the products they invest in is alarming.
More education is needed, especially among young investors. It starts as early as in school, where it becomes more important to gain knowledge in finance by learning how to spend, save and invest.
The more investors understand investment products, the more money they can make investing.
68% of Investors see responsible investing as a strategy to be used to mitigate market risk in their portfolio
Nuveen interviewed more than 1,000 investors (60% male/40% female) with at least $100,00 in investable assets about their views and opinions about responsible investing. 68% say that responsible investing is a strategy they can use to mitigate market risk in their portfolio.
The survey concludes that most investors still rely on investment advice from their financial advisors instead of doing their own research ( 65% say they use their own research for RI allocation.)
65% of Financial Planners recommend Exchange-Traded funds to their clients
The Financial Planning Association and the Journal of Financial Planning got responses from 413 financial planners who provide recommendations or investment advice for their clients about their behavior and expectations. 65% said that exchange-traded funds (ETFs) are the most recommended investment vehicles they recommend to their clients, while precious metals are only recommended in 8% of cases.
23% of participants indicated that they expect mutual funds to decrease in recommendation frequency. This confirms our view that investors prefer assigning more capital to investment vehicles with low management fees, which is good.
Young Investors are willing to lose up to 10% of retirement savings to support ESG causes
The Standford Graduate School of Business, the Roc Center for Corporate Governance at Standford University and the Hoover Institution Working Group on Corporate Governance at Standford University surveyed 2,470 investors about their retirement savings and ESG.
ESG is a type of ethical investing strategy and stands for environmental, social and governance. Investors who choose ESG investing aim to support those companies that make the world a better place.
The survey found that young investors are willing to lose up to 10% of their retirement savings if their investments help to support ESG causes. They want fund managers to advocate for social and environmental causes. At the same time, younger investors claim to be more knowledgeable about the stock market and expect higher future growth.
In contrast, older investors want fund managers to continue focusing on investments that generate a financial return, and they are now willing to lose anything of retirement savings to change the investment strategy towards ESG.
82% Of Investors say that financial performance is the most common input for making investment decisions
A survey conducted by public.com and Finimize shows that 82% of asked people consider financial performance the most common input for making investment decisions. In 36.8% of cases, friends are the primary source for a conversation about investing, and only 15.2% use a financial advisor as the primary source.
An interesting statistic is that 4.5% of people said that they first learned the basics of investing at an age below 10, followed by 34.2% at an age between 11-20 and 37.7% between 21-30 years. Only 23.6% say they first learned about investing basics when they were over 30.
20% of Americans Household earn $4,200 passive income per year
The U.S. Census Bureau evaluates data on American households. The most recent data indicates that about 20% of American households (mainly California and Florida residents) earn passive income through interest, dividends, or rental properties. The higher the income of a household, the higher the passive income. Bes
The passive income streams in large metros are led by Miami-Fort Lauderdale West Palm Beach, where the median passive income is as high as $9,000, with a median total household income of $59,000. Los Angeles Long Beach Anaheim in California follows in 2nd place with a median passive income of $8,050 at a total median household income of $77,000. Those who expect New York at #3 get disappointed since #3,4,5, and 6 are all Californian areas before NY comes at #7.
Still, the real winner is the small metro Hilton Head Island in Bluffton Beaufort (South Carolina), where the median passive income is as high as $15,000.
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