10 Reasons Every American Adult Should Invest in the Stock Market

Jeremy Siegel, the Wharton School finance professor who wrote the classic investing book Stocks for the Long Run, famously called the stock market the "greatest wealth creator of all time" if those results are measured in decades instead of months or years.

However, a recent Gallup survey found that only 62% of U.S. adults are currently invested in the stock market through individual stocks, mutual funds, or retirement accounts. The ones who aren't invested might be shunning stocks due to a lack of cash, a low tolerance for risk, a distrust of Wall Street, or poor financial literacy.

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So today, let's cut through all that confusion and discuss 10 reasons every American adult should be invested in the stock market -- regardless of their income, savings, or appetite for risk.

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1. Savings accounts can't beat inflation

From 2004 to 2024, the U.S. had an average annual inflation rate of 2.5%. During that same period, U.S. savings accounts paid an average annual yield of 1%. So if you had simply kept your cash in a savings account, your purchasing power would have steadily withered. The Federal Reserve's rate hikes in 2022 and 2023 boosted the yields of savings accounts, CDs, and T-bills to between 3% and 5%, but those yields will shrivel again as interest rates drop.

2. Bonds don't always beat inflation

Some bonds -- like Treasury-Protected Inflation Securities (TIPS), Series I (inflation-tracking) bonds, and long-term Treasuries -- are designed to keep pace with inflation. However, most Series EE (fixed-rate), municipal, and corporate bonds struggle to stay ahead of that curve. Some of those bonds might outpace inflation over the short term with higher yields, but they usually come with a lot more credit risk than lower-yielding bonds.

3. The S&P 500 outpaces inflation

Meanwhile, the S&P 500 -- the index of the 500 leading publicly traded companies in the U.S. -- delivered an average annual return of more than 10% since its inception in 1957. Past performance never guarantees future gains, but the S&P 500 should keep rising as long as the U.S. economy keeps expanding. So if you don't want to fret over individual stocks, you can directly invest in the S&P 500 through the low-cost Vanguard S&P 500 ETF (NYSEMKT: VOO).

4. It doesn't cost anything to get started

In the past, investors were usually charged commissions for each trade. But over the past decade, commission-free trades -- which were popularized by newer trading platforms like Robinhood Markets -- became the industry standard.

5. Fractional trades make investing even simpler

With some of the market's top stocks trading at hundreds or thousands of dollars per share, it seems like you need a lot of cash to get started. That was true in the past, but most brokerages now offer fractional trades -- which allow you to gradually accumulate shares of high-flying stocks like Nvidia or Amazon.

6. Small investments add up over time

If you'd invest $100 each month with a modest 8% annual return, you would compound your gains to over $150,000 in 30 years. Therefore, you don't necessarily need to set aside a lot of cash to thrive in the stock market -- you just need to make consistent bite-sized investments.

7. The top stocks aren't as volatile as you think

There are plenty of risky and volatile stocks. But there are also plenty of evergreen stocks that pay predictable dividends and generate fairly stable long-term returns. For example, Coca-Cola's stock rallied 213% over the past 20 years -- and if you had reinvested your dividends, you would have generated a total return of 473% and easily outpaced inflation. Warren Buffett's Berkshire Hathaway surged 786% during the same period.

8. It's a great way to gain a financial education

The stock market might seem confusing, but it becomes clearer once you understand a company's business model, evaluate its earnings reports, and realize that it only requires simple arithmetic to calculate the stock's valuations. Once you grasp those basic metrics, it becomes easier to analyze stocks and understand the broader financial markets. Teaching yourself how to invest is a great way to increase your own financial literacy and make smarter decisions with money.

9. You should secure your retirement today

Being smarter with money could help you retire earlier and more comfortably. But according to the Federal Reserve, only 54.3% of Americans have retirement accounts, and a mere 4.7% of those accounts have hit $1 million in savings. Building up a portfolio of stocks, index funds, and exchange-traded funds could help you join that elite minority.

10. Passive income grants you more freedom

Once you build up a $1 million portfolio, you can spread it across conservative dividend stocks that pay yields of 4% to 5% to generate $40,000 to $50,000 in extra income every year. If you don't need that cash right away, you can reinvest it into the same stocks to compound your gains. That's why stocks are still definitely one of the world's greatest wealth creators -- and why every adult in the U.S. should have some exposure to the stock market in their retirement accounts.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.