Why Most Households Never Invest in Stocks—and Why Education Matters

Stock market participation is often portrayed as a matter of personal preference. Some people are risk-takers, others are not. Some feel comfortable investing in equities; others prefer to avoid volatility altogether.

But this explanation misses a deeper and more structural driver of who invests in stocks: education.

Evidence from long-run U.S. data shows that stock ownership is not simply about appetite for risk. It is closely tied to educational attainment—and this link helps explain why wealth inequality persists even in periods of economic growth Loaiza_EE2025.

The stark reality of stock ownership

Across most of the population, stock ownership is remarkably rare.

When looking at household data over the life cycle, a striking fact emerges: median stock ownership is zero for the majority of education groups. In other words, for many households, equities never become part of their financial portfolio at any point in adulthood.

This pattern holds even as individuals age, earn more, and accumulate savings. While average stock holdings increase with age and income, the median remains at zero—indicating that participation is concentrated among a relatively small subset of households.

That subset is overwhelmingly composed of individuals with college and postgraduate education.

Education and entry into the stock market

Meaningful participation in the stock market emerges almost exclusively among the college-educated. For individuals without a college degree, stock ownership remains limited and sporadic, even later in life.

This is not merely a reflection of higher incomes. After accounting for parental wealth, family background, and cognitive ability, education continues to exert a strong and independent influence on stock participation.

Education appears to act as a gateway into financial markets—particularly those involving higher risk and higher potential returns. Stocks are among the most complex and volatile assets households can hold. Entering this market requires not only disposable income, but also confidence, information, and familiarity with financial institutions.

Lowering informational and behavioral barriers

Why does education matter so much for stock ownership?

One explanation lies in informational barriers. Understanding equity markets, diversification, and long-term returns requires a level of financial literacy that is unevenly distributed across the population. Education improves the ability to process financial information and evaluate complex choices, reducing the perceived cost of participation.

Another explanation is behavioral. Stock investment involves uncertainty, delayed gratification, and tolerance for short-term losses. Education is associated with greater willingness to take calculated risks and to engage in long-term planning—traits that are particularly relevant for equity investment.

These channels help explain why education matters even when income differences are taken into account. Education does not just raise financial capacity; it lowers the cognitive and psychological barriers that keep households out of stock markets.

Stocks, compounding, and wealth inequality

These participation gaps have major implications for wealth inequality.

Stocks are one of the primary engines of long-run wealth accumulation. Over time, compounded returns from equities far exceed those of safer assets such as savings accounts. Households that never enter the stock market miss out on these gains entirely.

As a result, even modest differences in participation can translate into large wealth gaps over decades. This helps explain why income growth does not necessarily reduce wealth inequality—and why asset-based inequality can persist even in expanding economies.

If only a narrow, highly educated segment of the population holds equities, then the benefits of economic growth and financial market expansion accrue disproportionately to that group.

Education as a lever for financial inclusion

Seen through this lens, education plays a central role in financial inclusion.

Education does not guarantee stock ownership, nor should everyone hold risky assets. But the evidence suggests that without higher education, many households face structural barriers to participation that go well beyond personal risk preferences.

For policymakers and institutions concerned with inequality, this implies that expanding access to education—especially higher education—may have long-run effects on wealth accumulation that are not captured by wage-based evaluations alone.

It also suggests that efforts to broaden stock market participation, whether through retirement systems or individual investment accounts, are likely to be more effective when paired with investments in education and financial capability.

The takeaway

Most households never invest in stocks—not because they are inherently risk-averse, but because access to financial markets is deeply shaped by education.

By lowering informational and behavioral barriers to high-return assets, education determines who participates in wealth-building opportunities and who remains excluded. In doing so, it plays a quiet but powerful role in shaping long-run wealth inequality.

Understanding this link is essential if the goal is not only economic growth, but inclusive and resilient prosperity.