MW Americans are more invested in the stock market than ever - and that may be adding to the recent turmoil

By Charles Passy

Newbie investors may not be able to stomach the ups and downs of the market, especially when they've only experienced the upside in recent years, financial professionals say

If the current stock-market upheaval feels especially scary for investors, there could be a very good reason - and it may have little to do with their concerns about President Donald Trump's tariff policies or fears of an impending recession.

It may be simply be that they're relatively new to the investing game.

That's the view from some financial advisers and experts, who point to the fact that a historically high percentage of Americans are now invested in the market, based on various studies and reports. One telling example: The Investment Company Institute notes that 53.7% of American households owned mutual funds in 2024. In 1980, that figure was 5.7% - and even as recently as 2010, it stood at 45.3%.

So with more Americans than ever putting their hard-earned money into securities, including stocks, there's more potential for panic, especially among newbie investors. And that could continue to hold true in the days and weeks ahead: On Tuesday, the S&P 500 SPX erased early gains and declined by more than 2%. The index is down more than 15% for the year.

'The drop feels heavier now because [market] exposure got baked into ordinary life.'David Materazzi, Galileo FX

"The drop feels heavier now because [market] exposure got baked into ordinary life," David Materazzi, chief executive officer of Galileo FX, an automated trading platform, told MarketWatch. "Someone checks their balance during lunch: The number's smaller. That number used to be abstract. Not anymore."

A record number of Americans are now in the market, financial professionals say, in part because in recent decades, many companies have done away with traditional pensions and set up 401(k)s or similar investment programs for their employees to fund their retirement. In many cases, employees are automatically enrolled in these programs.

But it goes beyond retirement investing, professionals note. Americans have also found their way into buying individual stocks through platforms - Robinhood (HOOD) is a prime example - that make trading both simple and cheap, if not effectively free. Investing has become almost like a sport for some of these traders, especially the younger ones - not unlike betting on professional sports.

"This is the Robinhood generation. They've seen the stock market as a gambling app," said Scott Anderson, chief U.S. economist at BMO Capital Markets.

A Robinhood spokesperson noted the company has seen the number of its net funded customers increase by 2 million to 25.6 million over the past year though February.

'This is the Robinhood generation. They've seen the stock market as a gambling app.'Scott Anderson, BMO Capital Markets

The final factor behind the American market mania is perhaps the most obvious: With the market's dramatic rise until recently - the S&P 500 gained more than 20% in both 2023 and 2024 - lots of people wanted in.

"Everybody talks about it," said Eugenio J. Alemán, chief economist at Raymond James.

But some of these new investors may not have participated in the market during previous downturns, such as the 2008-09 decline precipitated by the subprime-mortgage crisis or the 2020 drop prompted by the COVID-19 pandemic. And many probably were not even born yet during the Black Monday crash of 1987, professionals note.

Which means these new investors may not be as likely to take a measured approach to the recent turmoil. But by panicking and getting out of stocks, they can make matters worse for the market overall.

The end result, said David Rosenstrock, director at New York City-based Wharton Wealth Planning, can be more turmoil. "An increasing number of Americans investing in stocks can heighten systemic risk during economic downturns," he said.

Still, we shouldn't rush to point the finger at the newcomers to the market. Some financial advisers say it's inevitably older investors who are the most fearful during times like these. That's because they have a shorter timeframe for their investments to grow - or in this case, to recover - particularly if they're retired or are nearing retirement.

If anything, some investors in their 20s and 30s may be more excited by what they're seeing right now, professionals say. In effect, the market is on sale for these newbies.

"If you're young, this is an opportunity," said Thomas Van Spankeren, chief investment officer of RISE Investments, a Chicago-based advisory firm.

-Charles Passy

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April 08, 2025 15:49 ET (19:49 GMT)

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