April 2024

The use of investment brokerage accounts has increased notably in recent years, broadening the population that is able to earn returns on wealth in the stock market and other financial assets. In the U.S., the percent of households with stock holdings increased to an all-time high of 58 percent as of 2022, according to the Federal Reserve’s Survey of Consumer Finances, up from 49 percent in 2013.¹ Historically, use of brokerage accounts was more concentrated among those with higher incomes.² However, within the past decade, our data show increasing engagement with investment accounts across the income spectrum. Notably, this engagement increased during a period in which the incomes of lower-income workers grew relatively quickly.

In this report, we use data from over 10 million active checking account users from 2007 to 2023.³ In recent years, about a quarter of our sample transferred significant funds to an external investment account.⁴ The data link households’ financial dynamics and investing transactions, enabling insight into the drivers underlying the rise in investing. We find that income growth—particularly when sustained over time—emerges as one of the strongest predictors of the investment transfers that we explore.

Our quantification of the connection between income changes and investing behavior allows policymakers to translate developments in the labor market or fiscal policy into the evolution of wealth inequality. For example, economic booms and tight labor markets have tended to result in outsized wage gains at the lower end of the income distribution. Asset prices tend to be relatively high when these economic conditions hold,⁵ implying that the timing of low-income individuals’ gains may put them at a disadvantage in terms of entering or adding to financial investments at attractive valuations.

We organize this report around three findings:

In a given month, lower-income individuals were four times more likely to transfer funds to investment accounts in 2023 than they were in 2015.
Individuals are more likely to transfer funds to investment accounts after income gains, particularly those sustained over the course of a year.
Lower-income investors made investments when stocks were at valuations 4 to 6 percent above the highest earners since 2008, likely, in part, due to the timing of their relative income gains.

The rise in retail investing: Roles of the economic cycle and income growth