The Dow's Role in Making You $1.5 Trillion Richer in 2014

The Dow Jones Industrials hit a new record high, and stocks have helped make Americans wealthier -- but by how much?

Jun 5, 2014 at 9:03PM

The Dow Jones Industrials (DJINDICES:^DJI) jumped almost 99 points on Thursday, joining the S&P 500 (SNPINDEX:^GSPC) at a new record high, and showing the continuing strength of the U.S. stock market overall. Indeed, the stock market has played a vital role in boosting the net worth of the U.S. population, according to a Federal Reserve report released today. Let's take a closer look at the report and how it likely affected your finances.

Federal Reserve building. Source: Dan Smith.

Getting richer
The Fed's statistical release on the Financial Accounts of the U.S. provides an upper-level picture of how the economy is doing in terms of creating wealth. As of the end of the first quarter, total household net worth rose to almost $81.8 trillion, up almost $1.5 trillion from the end of 2013. As impressive as that pace appears, it actually represents a slowdown from 2013's growth rate, with net worth soaring by more than $9.4 trillion during the four quarters of last year.

What's interesting, though, is what the source of that greater wealth was. The value of corporate equities and mutual fund shares jumped by a total of $361 billion, which equates to roughly a quarter of the overall increase so far in 2014. Yet, as we saw during the housing boom, real-estate values played a much more important role in the rise of household net worth, with a jump of about $750 billion representing fully half of the overall gain in American wealth.


One of the more interesting things about the Fed data is what the report says about asset allocation among American households. Real estate makes up about a quarter of overall assets, with outstanding mortgages reducing net investment in real estate to about 15%. Among financial assets, deposits make up about 15%, credit-market securities like bonds amount to less than 10%, and stocks and mutual funds add up to about a third. The remainder is included in the present value of expected pension payments and in direct investments in businesses like sole proprietorships and partnerships.

If nothing else, the Fed report puts some perspective on the role that stock market investments have on the overall wealth of the American people. As important as movements in the Dow Jones Industrials are to investors, what happens with home prices has a far bigger impact on the net worth of millions of Americans with little or no money invested in stocks or mutual funds. As a result, even if you count yourself among the investing class, you shouldn't forget that the vast swath of Americans pay little attention to the activity of the Dow Jones Industrials in their own financial lives.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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