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Before, investing was primarily accessible to wealthy individuals. As a result, the stock market became heavily concentrated in the hands of the rich, allowing their wealth to grow steadily over time and widening the inequality gap. Today, the disparity is striking. The wealthiest 1% of Americans own as much of the stock market as the bottom 50% of U.S. households, according to the Board of Governors of the Federal Reserve System. As of the fourth quarter of 2024, the top 1% of U.S. households held approximately 31% of the nation’s total household wealth, while the bottom 50% collectively owned just 2.5% (see Chart 1). Accessible investing can play a vital role in narrowing this gap. It offers individuals of all income levels the opportunity to build wealth and work toward a better quality of life.
Fortunately, recent innovations in the financial industry have opened the door for more people to participate in financial markets. Today, there’s no required minimum balance to open a brokerage account. With as little as $100, anyone can start investing – a welcome shift from the past, when only the wealthy could take advantage of stock market growth. One of the most significant developments has been the introduction of commission-free trading for U.S. stocks, ETFs, and options. This has been a game-changer for beginner investors and investors with small account balances. In 2015, Robinhood pioneered zero-commission trading. By 2019, Charles Schwab followed suit, and soon after, most major brokerage firms eliminated trading fees. Today, you can open an account with firms like Fidelity, Charles Schwab, or Robinhood and trade without paying commission costs.
For investors with limited capital, zero-commission trading is especially important. In the past, brokerage firms charged significant fees – $4.95 per trade at Charles Schwab and $9.95 per trade at TD Ameritrade. These fees significantly dragged down investment returns. For example, if you had $1,000 to invest and wanted to buy ten different securities, paying $9.95 per trade would cost you $95.50 to buy and another $95.50 to sell—totaling $191 in trading fees. You would need to earn back 24% just to break even to get to $1000. In the pre-zero-commission era, small investors couldn’t afford to trade individual securities without falling behind in performance. They were at a clear disadvantage. But now, everything has changed. Today, thanks to zero-commission platforms, investors of all sizes have the opportunity to participate in the stock market on more equal footing.
References
Board of Governors of the Federal Reserve System (US), Share of Corporate Equities and Mutual Fund Shares Held by the Top 1% (99th to 100th Wealth Percentiles) [WFRBST01122], retrieved from FRED, Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/WFRBST01122
Board of Governors of the Federal Reserve System (US), Distribution of Household Wealth in the U.S. since 1989: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/
Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.
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By Ivan Sichkar, CFA, FRM, CFP®
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Enter your email address to follow ECNFIN.com and receive notifications of new articles by email for free. Be the first to read and do not miss future timely research publications.
Before, investing was primarily accessible to wealthy individuals. As a result, the stock market became heavily concentrated in the hands of the rich, allowing their wealth to grow steadily over time and widening the inequality gap. Today, the disparity is striking. The wealthiest 1% of Americans own as much of the stock market as the bottom 50% of U.S. households, according to the Board of Governors of the Federal Reserve System. As of the fourth quarter of 2024, the top 1% of U.S. households held approximately 31% of the nation’s total household wealth, while the bottom 50% collectively owned just 2.5% (see Chart 1). Accessible investing can play a vital role in narrowing this gap. It offers individuals of all income levels the opportunity to build wealth and work toward a better quality of life.
Fortunately, recent innovations in the financial industry have opened the door for more people to participate in financial markets. Today, there’s no required minimum balance to open a brokerage account. With as little as $100, anyone can start investing – a welcome shift from the past, when only the wealthy could take advantage of stock market growth. One of the most significant developments has been the introduction of commission-free trading for U.S. stocks, ETFs, and options. This has been a game-changer for beginner investors and investors with small account balances. In 2015, Robinhood pioneered zero-commission trading. By 2019, Charles Schwab followed suit, and soon after, most major brokerage firms eliminated trading fees. Today, you can open an account with firms like Fidelity, Charles Schwab, or Robinhood and trade without paying commission costs.
For investors with limited capital, zero-commission trading is especially important. In the past, brokerage firms charged significant fees – $4.95 per trade at Charles Schwab and $9.95 per trade at TD Ameritrade. These fees significantly dragged down investment returns. For example, if you had $1,000 to invest and wanted to buy ten different securities, paying $9.95 per trade would cost you $95.50 to buy and another $95.50 to sell—totaling $191 in trading fees. You would need to earn back 24% just to break even to get to $1000. In the pre-zero-commission era, small investors couldn’t afford to trade individual securities without falling behind in performance. They were at a clear disadvantage. But now, everything has changed. Today, thanks to zero-commission platforms, investors of all sizes have the opportunity to participate in the stock market on more equal footing.
References
Board of Governors of the Federal Reserve System (US), Share of Corporate Equities and Mutual Fund Shares Held by the Top 1% (99th to 100th Wealth Percentiles) [WFRBST01122], retrieved from FRED, Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/WFRBST01122
Board of Governors of the Federal Reserve System (US), Distribution of Household Wealth in the U.S. since 1989: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/
Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.
Subscribe wherever you enjoy podcasts:
Our Mailing Address:
ECNFIN
1288 Kapiolani Blvd Apt 4003, Honolulu, HI 96814
Our Phone:
+1 720-593-1135
Our Fax:
+1 720-790-7606