Key Insights
- 43% of American adults say that they’ve invested outside of a 401(k).
- 69% of people who have nothing invested cite money as the reason.
- Over half (52%) surveyed have only been doing so for the last 5 years.
- Retirement (48%) and financial independence (42%) are the driving factors for investors.
- Around a third of investors (35%) use their own taxable brokerage account.
- A quarter of investors say they have less than $1,000 in their trading account.
Investing outside of the 401(k)
Most people know that sticking money in the bank and letting it sit there isn’t the best way to make your money work for you. However, only 43% of American adults say that they’ve invested their hard-earned money outside of a 401(k), according to the results of the Finder and Tastytrade Investor Sentiment Report.
Gender
The gender pay gap extends to investing. While only just over a third of women (36%) say they’ve invested outside of their 401(k), over half of men (54%) say they invest — meaning men are 48% more likely to invest than women.
Age
Those ages 35 to 44 are the group most likely to be investing in their future at 53%, followed by those ages 25 to 34 (51%) and 18 to 24 (50%). Investing appetite drops as people get older, with 40% of those ages 45 to 54 saying they’ve invested outside their 401(k), 35% of those ages 55 to 64 and just 33% of those over 65.
Location
Those living in the Mountain region (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming) have they highest percentage of those who said they’d invested outside of their 401(k), while only a third (33%) of those living in West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) said the same.
Income
The largest determinant of whether you’re investing outside of your 401(k) is if you’re earning above or below $100K, with close to 67% of those earning above $100K investing versus just 38% earning less than $100K saying they’ve ever invested.
Why aren’t people investing?
What’s holding back over half of adults from investing? Money, of course, with 69% of those who’ve never invested saying they don’t have the money to invest. This reason is more than double the second most common response, with 30% saying they don’t know what to invest in.
How long have people been investing?
While Covid saw the world grind to a halt, one thing it didn’t stop was retail investing. In fact, stimulus checks and an increase in household savings saw “enhanced market participation by [low- to middle-income households] due to an unexpected wealth increase” during the Covid period, according to an economic paper published on Science Direct.(1)
Not surprisingly, over half (52%) of those surveyed who had invested outside of their 401(k) said they’d been investing for four or fewer years, with the largest portion of those investors saying they started between three to four years ago (22%) — the peak of the pandemic.
Gender
Women were far more likely to get into investing than men during this period, with 57% of women saying they’d been investing less than four years compared to 47% of men.
Age
For over two-thirds of those over 65 investing is nothing new, with 68% of investors saying they’ve been playing the market for over 20 years. At the other end of the spectrum, 81% of those ages 18 to 24 have been investing for under four years.
Retirement is the driving force for most investors
Getting ready for retirement is front of mind for close to half of investors (48%), with financial independence (42%) and additional income streams (39%) also popular reasons for investing.
Gender
Men (37%) are far more likely to say that the goal of their investing is to stay ahead of inflation than women (27%), as is the potential for additional income — 45% of men compared to 33% of women. On the flip side, women are slightly more likely to be concerned with planning for future medical bills, 18% of women compared to 15% of men. Women (34%) are also more likely than men (21%) to say they started investing because of a family member.
Where are people getting their investing advice?
Informational websites are the top destination for people looking for tips on what to invest in (32%), 27% rely on advice from their friends and 26% either turn to their parents or traditional media.
Gender
Women (25%) are twice as likely as men (12%) to go to their partner for advice on what to invest in, while men (38%) are more likely to look to informational sites than women (25%).
Age
Social media is a popular source for investing advice. It is the number one place those ages 25 to 34 (40%) turn for information and the second most common place for those ages 18 to 24 (42%) and those ages 35 to 44 (34%).
In terms of educational resources, social media (37%) is the second most common place people go to develop their investment strategy, just behind content from brokerages (38%).
Social media is the number one destination for both Gen Z and Gen Y to learn about investing, with 52% of 18- to 24-year-olds, 56% of 25- to 34-year-olds and 45% of 35- to 44-year-olds relying on social media as an educational tool for investing. For older generations, information gathered from brokerages is most common.
Most traders started by shooting from the hip
When asked where they started trading, close to a third of traders (30%) started by just opening a brokerage account and learning from there.
Age
This DIY approach was by far most popular with those over 65 (49%), whereas those aged 25 to 34 years were most likely to read educational information online (28%).
A secure retirement the goal for most investors
Building wealth for retirement is the end goal for 54% of investors, with financial independence not too far behind at 42%.
Stocks by far the most common starting point for investors
Investors are almost three times more likely to have started out investing in stocks than in any other investment class, with 43% saying they bought stocks as their first investment, followed by mutual funds way back with 12% and, somewhat surprisingly, cryptocurrencies (9%).
With stocks being the most common place investors started out, it makes sense that it’s also the most common place people say they currently have their money invested, at 64%. Over a third (34%) say they have their money in mutual funds and 28% say they’re playing it safe by keeping their money in a high-interest savings account (HYSA).
Close to half of investors (48%) also think that stocks are their favorite long-term investment options, followed by mutual funds (27%) and bonds (21%).
A quarter of investors have less than $1,000 in their accounts
Roughly a quarter of investors say they have less than $1,000 in their trading account, with 10% claiming to have between $500 and $999 invested and 14% having under $500.
Communication services the top sector for investors
With companies like Alphabet (GOOG) and Meta Platforms, it’s not at all surprising that the Communication Services sector is where most investors choose to put their money.
Investors prefer individual stocks over exchange-traded funds and options
In terms of how people are choosing to invest their money, a touch over two-fifths (42%) say they prefer to buy individual stocks, with 24% investing in mutual funds and 17% opting to put their money in exchange-traded funds (ETFs).
A third have their own brokerage account
Taxable brokerage accounts are the top choice for around a third of investors (35%), followed by investing via an IRA for 20%.
Mobile apps the top choice for investing
Close to half of investors (48%) choose to invest using a mobile app, a third prefer desktop trading platforms (33%) and about one in five (19%) use their web browser.
Gender
Women (52%) are more likely than men (45%) to turn to their phones to invest, while men (36%) are more likely than women (30%) to be using a desktop trading platform.
Age
Mobile apps are by far the top choice for those under 45, with 66% of those aged 35 to 44 choosing to invest via their app, along with 56% of 25- to 35-year-olds, and 51% of 18- to 24-year-olds.
What prompts people to place a trade?
The belief that a stock or option is a good value is the number one reason people choose to invest at 36%, while a little over a quarter (26%) say that an upcoming earnings call is the reason they choose to invest.
Investors risk tolerance leans conservative
Investors in the US are more likely to be playing it safe, with 69% saying their risk tolerance leans more to the conservative side, with 34% rating their risk tolerance as moderate and 18% either saying it’s moderately conservative or conservative.
Gender
While both men and women tend to lean more conservative with their risk appetite, 75% of women say their investing habits lean more to the moderate side compared to 63% of men.
Investor sentiment highest for stocks
Three-quarters (75%) of investors think that now is a good time to buy stocks. High-interest savings accounts and commodities are also popular choices at 65%. At the other end of the spectrum, investor sentiment is very low for Forex with 69% saying it’s not a good time to play the currency market.
Most investors say they’re active investors … but are they?
Over half (55%) of investors surveyed say they’re active investors.
Men are more likely to say they’re an “active investor,” with 61% saying they play the market compared to 55% of women.
Actively investing sees a decline as people get older, with 76% of those aged 18 to 24 saying they’re an “active investor” compared to just 20% of those over 65.
According to an LSEG white paper, “active investors typically execute multiple trades daily.”(2) However, about half (53%) of respondents who said they made less than five trades in a week also said they were an “active trader”.
Most investors check their portfolio at least once a week
Almost three-quarters (74%) of investors say they check in on their portfolio at least once a week, with 31% checking weekly, 26% checking daily and 17% checking multiple times a day.
Investors are less bullish than 6 months ago
Investor sentiment is cooling, with just 11% saying they’re investing more aggressively than they were six months ago. 45% say their investment habits haven’t changed, while 44% say their investments are more conservative.
Inflation is the number one reason cited by investors as to why they changed their investing habits at 60%, with a sizable section (37%) also saying the threat of recession contributed.
