Tim Walz shares: Why 99 million Americans have the same portfolio as the vice presidential candidate

Like it or not, American politicians are free to trade stocks just like any other citizen, although they sometimes have greater access to non-public information and the ability to influence laws that have a real impact on private sector companies.

For example, among the factors that have put downward pressure on Chinese stocks in recent months are US export restrictions on high-power chips and the technology used to make them. Similarly, helpful legislation also has the ability to bolster stocks: Consider the CHIPS Act of 2022, which allocates tens of billions of federal dollars to companies like Intel to help them build new chip manufacturing plants in the US

In that light, it might seem refreshing, or at least unusual, that Democratic vice presidential nominee Tim Walz doesn’t own any stock. Not only that, but Walz owns no bonds or real estate, having lived in the Minnesota governor’s mansion for the past six years. In essence, Walz does not directly own any major financial assets, although he does have pensions from his years as a teacher and from his time as a congressman.

That lack of financial assets makes him something of an outlier in Washington, but among ordinary Americans, his position is far from unusual.

According to research by The Motley Fool, 62% of Americans own stocks. That’s 162 million US adults, but there remains a substantial percentage who don’t own stocks. There are 99 million.

It is not clear why Walz does not own shares. He may have decided to rely on his pensions for retirement. Other Americans may have a number of different reasons for ditching the wealth-creating engine that is the stock market. Three reasons in particular seem to be common – and if you’re one of those people who’s let one of those things keep you from taking action, you might want to reconsider.

Image source: Getty Images.

1. Fear of losing money

The percentage of Americans who own stocks has risen considerably since the post-financial crisis era, when it fell, reaching 52% in 2013.

The best explanation for this pattern is that stock market crashes scare away retail investors. They understand that the risk of losing half or more of their invested dollars is too great to accept, even though the potential rewards of the investment may be substantial.

However, major stock market crashes are relatively rare. The S&P 500 it has historically declined by 30% or more about once every decade. More importantly, however, the broad market index has always bounced back from those bear markets to recover and set new highs. In fact, it hit another all-time high just a few weeks ago. The dynamism of the US economy has made the stock market a reliable long-term growth vehicle for investors. Over its history, the S&P 500 has earned a compounded annual return of about 9% with dividends reinvested. This is a difficult standard to beat over the long term in any asset class.

2. They can’t afford it

Many Americans believe that they can’t afford to invest in the stock market or that they don’t have enough money to invest to make it worthwhile.

While it can be hard for those living paycheck to paycheck to put money into savings, you don’t need a lot of money to start investing. In fact, a number of major brokerages, including Fidelity and robinhoodwill allow you to buy fractional shares for as little as $1 and with no commissions. Charles Schwab will allow you to buy fractional shares for as little as $5.

People looking for more immediate returns on their investments may want to consider dividend stocks, which pay shareholders a portion of their profits, usually every three months. For many investors, dividend stocks offer the best of both worlds, income and growth.

3. They don’t know how

Once upon a time, investing in the stock market was not so easy. In the pre-internet days, you either had to call a stockbroker every time you wanted to make a trade, or entrust your investments to a financial manager.

These days, it’s as easy as downloading an app on your phone, and most major brokerages can get you set up in 15 minutes. It’s not much different than downloading a payments app like PayPal. Usually, you just need to prove your identity and link your brokerage account to a funding source, such as your bank account.

However, creating a brokerage account is only half the battle. You also have to make the decision to invest in something. For first-time investors, the easiest option may be to buy shares of an exchange-traded fund (ETF). These are investments that trade like stocks but actually hold entire portfolios, giving investors exposure to a diverse range of stocks. Some are index funds, which (as the name suggests) are designed to track the performance of benchmarks such as the S&P 500 or Nasdaq-100.

If you’re just starting out, it’s a good first investment Vanguard 500 Fund (VOO -2.02%)an S&P 500 ETF that puts your money in all the stocks in that broad market index for a very low annual fee.

If you’re looking for another reason to invest, you might want to consider another politician’s perspective. In 2021, then-Speaker of the House Nancy Pelosi argued that lawmakers should be able to trade stocks, saying, “We are a free market economy. They should be able to participate in it.”

Pelosi is right. Participating in the stock market is one of the easiest and most rewarding financial decisions you can make. It’s never too late to start, even for someone like Tim Walz.