Tastytrade survey shows more than half of Americans don’t invest outside their 401(k)

The latest Retail Investor Sentiment Report, compiled by Finder & Tastytrade, looks at the state of retail investing in America, here are the key findings

How many Americans are investing outside of their 401(k)?

According to the report, 43% of American adults say they’ve invested outside of a 401(k).

This means that less than half of the adult US population is actively investing beyond their employer-sponsored retirement plans.

Does the report find evidence of a gender gap in investing?

Yes, there are notable differences between genders. The report reveals that men are more likely to invest outside of a 401(k) than women. However, women were shown to be far more likely to get into investing, with 57.0% of female investors surveyed, saying they had been investing for four years or less, compared to just 47.0% of men.

Those aged 35 to 44 are the most likely to invest, with 53.0% of this group saying they’ve invested outside their 401(k).

They’re closely followed by the 25-34 age group where 51.0% are likely to invest, and the 18-24 cohort where 50.0% said they were likely to invest in the markets..

What’s the biggest barrier that prevents people from investing in America?

Money, or lack thereof, is the primary barrier.

A whopping 69% of those who’ve never invested cite not having enough money as the main reason. Another 30% said they didn’t know what to invest in. Whilst, 13.0% were unsure about how to choose a broker.

Unsurprisingly the investor’s level of income was closely correlated to whether they invested outside of the retirement plans 67.0% of those earning over $100,000 per annum do invest outside. whilst just 38.0% of those earning $100,000 or less said they invested elsewhere.

All of which underscores the importance of financial literacy, and understanding that investing can start with small amounts.

The pandemic spurred a wave of new investors. Over half, some 52.0%, of those surveyed who had invested outside of their 401(k) said they’d been investing for four or fewer years, with the largest cohort starting 3-4 years ago – coinciding with the peak of the pandemic.

What are the main motivations for investing?

Retirement was the key driver among 48.0% of respondents, financial independence also ranked highly and was the other major driver with a score of 42.0%.

Women were less concerned about financial independence than men, with a score of 38.0% versus the male respondents’ score of 45.0%.

However, the gap between the sexes was much closer when it came to the question of preparing for retirement, where the margin between the groups was just 3.0% at 46.0% plays 49.0%

This suggests that many Americans are thinking about the long-term when it comes to their financial future.

Where are people getting their investment advice?

Informational websites are the top choice, with 32.0% of respondents citing these as their main source of information and advice.

This was followed by advice from friends which scored 27.0%. Whilst sourcing advice from parents, or the traditional media scored 26.0% and 25.0% respectively.

Women were more likely to turn to their partner for advice with 25.0% of women choosing this option, versus 12.0% of men.

Whilst, men were more likely to use the internet and specialist websites for advice.

Interestingly, social media is a popular source of advice for younger investors. It was the number one channel, from which, those aged between 25-34 sought investment advice.

40.0% of respondents in this cohort use social media for this purpose.

What’s the most popular investment choice for beginners?

Stocks are by far the most common starting point for investors. 43.0% of those surveyed said they bought stocks as their first investment. Which, is almost three times more than the next most common choice, mutual funds which came in at 12.0%.

About a quarter of investors say they have less than $1,000 in their trading account, 10% had between $500 and $999 invested, whilst the other 14% had under $500 in their accounts.

6.0% of those, that are invested in stocks, had a portfolio size between $250,000 and $499,000. Whilst 8.0% of those invested in mutual funds, had a portfolio worth $500,000 or greater.

The investors are quite attentive to their investments. Almost three-quarters 74.0% say they check their portfolio at least once a week, with 31.0% checking weekly, 26% checking daily, and 17% checking multiple times a day.

Has investor sentiment changed recently?

Yes, there does seem to be a cooling in investor sentiment. Only 11.0% say they’re investing more aggressively than they were six months ago. In fact, 44.0% say their investments have become more conservative.

The rise in inflation which scored 60%, and fears about a recession which scored 37.0%, are the main reasons for the shift to a more conservative stance.

38.0% of investors look for content and information from their brokers, and a similar amount, 37.0%, look to social media. Online courses and textbooks, or books about investing, all scored 26.0%. Whilst 23.0% of respondents listen to podcasts to try and give them an edge.