The rate quoted for American stock market participation is indeed dramatic, but it is a little misleading because it stems from structural differences and reflects the slow death of defined benefit pensions. Most stock market participants in the US do so through employer-provided 401(k) retirement accounts. That this is increasingly the case is another reason why stock market performance is so politicized in the US.
employers subjectively choose retirement plan middlemen, who choose the end vehicles from fund managers.
there are at least 2 layers of inefficiency, where benefit:cost to the employee is secondary.
finally, just because some employee choices are often time-based target retirement funds does not mean the employees understand asset allocation, nor how much cost they should tolerate for what is essentially a bundle of passive indicies. i myself have seen these for 1-2% fees in limited choice plans.
Excellent summary! From my experience as a German, folks simply don't know where to start. And everybody is a "I told you so" expert when stocks are having a bad stretch.
On a general level, I'd add that Germans don't have a good risk culture. They don't understand how things that work on an everyday level can easily break in a ruinous fashion. And vice-versa, taking on prudent risk is an element of the good life.
Typical maxims here: "being self-employed is too risky", "my uncle smoked until he was 93, no problem", "I've been driving at really high speeds for years; stastically, the Autobahns are safe", "nuclear power can destroy Europe, it has to stop"...
The rate quoted for American stock market participation is indeed dramatic, but it is a little misleading because it stems from structural differences and reflects the slow death of defined benefit pensions. Most stock market participants in the US do so through employer-provided 401(k) retirement accounts. That this is increasingly the case is another reason why stock market performance is so politicized in the US.
this gives americans too much credit.
employers subjectively choose retirement plan middlemen, who choose the end vehicles from fund managers.
there are at least 2 layers of inefficiency, where benefit:cost to the employee is secondary.
finally, just because some employee choices are often time-based target retirement funds does not mean the employees understand asset allocation, nor how much cost they should tolerate for what is essentially a bundle of passive indicies. i myself have seen these for 1-2% fees in limited choice plans.
Excellent summary! From my experience as a German, folks simply don't know where to start. And everybody is a "I told you so" expert when stocks are having a bad stretch.
On a general level, I'd add that Germans don't have a good risk culture. They don't understand how things that work on an everyday level can easily break in a ruinous fashion. And vice-versa, taking on prudent risk is an element of the good life.
Typical maxims here: "being self-employed is too risky", "my uncle smoked until he was 93, no problem", "I've been driving at really high speeds for years; stastically, the Autobahns are safe", "nuclear power can destroy Europe, it has to stop"...
100% agree. One of the reasons why I left the country. It is too risk averse and focused on Schadenfreude when things go wrong.
And I had to laugh at your examples, because I literally heard every single on of these sentences at some point in my life. 😂
My two answers would be: a) risk aversion - which permeates all aspects of life here b) economic and financial illiteracy.