Bull market creates an era of mom-and-pop investors
Years of double-digit gains change how Americans view money management.
The record stock market of the 1990s - the greatest generator of wealth in America's history - has fundamentally shifted the way people in the workaday world view their money and finances.Skip to next paragraph
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From self-management of 401(k)s to the brave new world of Internet trading, Wall Street itself has come to the homes of Main Street, USA.
Just how long the unprecedented creation of wealth will continue depends, of course, on the stock market. But analysts say the culture of income has changed irrevocably.
In the past, ma and pa might have bought a few shares of a blue-chip stock and let them grow for a decade or two. More active middle-income investors might have taken a tip from their brokers, and then given them a call when they wanted to make an occasional quick profit - less a broker's fee and commission, of course.
Not today. It began in the mid-1990s, as the economy began to climb out of recession, as baby boomers began thinking more and more of their retirement.
And with unemployment sinking to record lows, these prosperous boomers, generally wary of Social Security, began to put their faith in the stock market.
"In '95, everything exploded," says Craig McBurney, founder and president of TradeMentor, an online company that teaches people how to do their own trading using the Internet. "And it was sort of a self-fulfilling prophecy: People who were looking ahead at retirement began aggressively going into equities. This drove the market, and in turn attracted even more cash."
Nest egg no longer
Indeed, the Dow Jones gained 33.5 percent in 1995, followed by 26.0 percent in 1996 and 22.6 in 1997. After a slower 16.1 percent gain in 1998, this past year closed out at 25.2 percent - the greatest creation of wealth in history.
So spectacular were these gains for people accustomed to the traditional ebbs and flows of the stock market, who could blame them for starting to disregard the "just think long-term" advice? The market was coming to be seen as more than just a means to put together a retirement nest egg.
"We've seen a reemergence of individuals buying and selling for their own account," says William Freund, director of the Pace University Center for Equity Markets and former chief economist for the New York Stock Exchange.
And it's not just for their retirement any more, he says. It's a way to augment income. New windows on the house, traveling, taking a leave of absence from work to do a project at home - these are just some of the boons of a robust economy on market-savvy middle America, say many observers.
And now comes the Internet. In just this past year, the advent of online trading has given folks unprecedented access to the markets and their own investments.
"That's the seminal shift in the '90s - people taking control of their money," says Mr. McBurney. "They couldn't take control of their money without the Net, because there wasn't any way to physically access the market unless you dragged yourself down to the floor of the stock exchange and became a floor broker. But how many people were going to do that?"